VISA INC., 10-K filed on 11/16/2012
Annual Report
Document and Entity Information Document (USD $)
In Billions, except Share data, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Mar. 30, 2012
Nov. 8, 2012
Class A common stock
Nov. 8, 2012
Class B common stock
Nov. 8, 2012
Class C common stock
Entity Information [Line Items]
 
 
 
 
 
Entity Registrant Name
VISA INC. 
 
 
 
 
Entity Central Index Key
0001403161 
 
 
 
 
Current Fiscal Year End Date
--09-30 
 
 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
 
 
Document Type
10-K 
 
 
 
 
Document Period End Date
Sep. 30, 2012 
 
 
 
 
Document Fiscal Year Focus
2012 
 
 
 
 
Document Fiscal Period Focus
FY 
 
 
 
 
Amendment Flag
false 
 
 
 
 
Entity Common Stock, Shares Outstanding
 
 
535,517,788 
245,513,385 
29,576,710 
Entity Well-known Seasoned Issuer
Yes 
 
 
 
 
Entity Voluntary Filers
No 
 
 
 
 
Entity Current Reporting Status
Yes 
 
 
 
 
Entity Public Float
 
$ 62.1 
 
 
 
CONSOLIDATED BALANCE SHEETS (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Sep. 30, 2011
Assets
 
 
Cash and cash equivalents
$ 2,074 
$ 2,127 
Restricted cash-litigation escrow (Note 3)
4,432 
2,857 
Investment securities (Note 4)
 
 
Trading
66 
57 
Available-for-sale
677 
1,214 
Settlement receivable
454 
412 
Accounts receivable
723 
560 
Customer collateral (Note 12)
823 
931 
Current portion of client incentives
209 
278 
Deferred tax assets (Note 20)
2,027 
489 
Prepaid expenses and other current assets (Note 6)
301 
265 
Total current assets
11,786 
9,190 
Investment securities, available-for-sale (Note 4)
3,283 
711 
Client incentives
58 
85 
Property, equipment and technology, net (Note 7)
1,634 
1,541 
Other assets (Note 6)
151 
129 
Intangible assets, net (Note 8)
11,420 
11,436 
Goodwill
11,681 
11,668 
Total assets
40,013 
34,760 
Liabilities
 
 
Accounts payable
152 
169 
Settlement payable
719 
449 
Customer collateral (Note 12)
823 
931 
Accrued compensation and benefits
460 
387 
Client incentives
830 
528 
Accrued liabilities (Note 9)
584 
562 
Accrued litigation (Note 21)
4,386 
425 
Total current liabilities
7,954 
3,451 
Deferred tax liabilities (Note 20)
4,058 
4,205 
Other liabilities (Note 9)
371 
667 
Total liabilities
12,383 
8,323 
Commitments and contingencies (Note 18)
   
   
Equity
 
 
Additional paid-in capital
19,992 
19,907 
Accumulated income
7,809 
6,706 
Accumulated other comprehensive income (loss), net
 
 
Investment securities, available-for-sale
3 
0 
Defined benefit pension and other postretirement plans
(186)
(186)
Derivative instruments classified as cash flow hedges
13 
18 
Foreign currency translation adjustments
(1)
(8)
Total accumulated other comprehensive loss, net
(171)
(176)
Total equity
27,630 
26,437 
Total liabilities and equity
40,013 
34,760 
Preferred stock
 
 
Equity
 
 
Preferred stock, $0.0001 par value, 25 shares authorized and none issued
0 
0 
Class A common stock
 
 
Equity
 
 
Common stock (Note 15)
0 
0 
Class B common stock
 
 
Equity
 
 
Common stock (Note 15)
0 
0 
Class C common stock
 
 
Equity
 
 
Common stock (Note 15)
$ 0 
$ 0 
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Operating Revenues
 
 
 
Service revenues
$ 4,872 
$ 4,261 
$ 3,497 
Data processing revenues
3,975 
3,478 
3,125 
International transaction revenues
3,025 
2,674 
2,290 
Other revenues
704 
655 
713 
Client incentives
(2,155)
(1,880)
(1,560)
Total operating revenues
10,421 
9,188 
8,065 
Operating Expenses
 
 
 
Personnel
1,726 
1,459 
1,222 
Network and processing
414 
357 
425 
Marketing
873 
870 
964 
Professional fees
385 
337 
286 
Depreciation and amortization
333 
288 
265 
General and administrative
451 
414 
359 
Litigation provision (Note 21)
4,100 
7 
(45)
Total operating expenses
8,282 
3,732 
3,476 
Operating income
2,139 
5,456 
4,589 
Other Income (Expense)
 
 
 
Interest income (expense)
29 
(32)
(72)
Investment income, net (Note 4)
36 
108 
49 
Other
3 
124 
72 
Total other income
68 
200 
49 
Income before income taxes
2,207 
5,656 
4,638 
Income tax provision
65 
2,010 
1,674 
Net income including non-controlling interest
2,142 
3,646 
2,964 
Loss attributable to non-controlling interest
2 
4 
2 
Net income attributable to Visa Inc.
2,144 1
3,650 1
2,966 1
Class A common stock
 
 
 
Other Income (Expense)
 
 
 
Net income attributable to Visa Inc.
1,664 1
2,638 1
1,940 1
Earnings Per Share [Abstract]
 
 
 
Basic earnings per share (Note 16)
$ 3.17 
$ 5.18 2
$ 4.03 2
Basic weighted average shares outstanding (Note 16)
524 
509 
482 
Diluted earnings per share (Note 16)
$ 3.16 
$ 5.16 2
$ 4.01 2
Diluted weighted average shares outstanding (Note 16)
678 3
707 3
739 3
Class B common stock
 
 
 
Other Income (Expense)
 
 
 
Net income attributable to Visa Inc.
343 1
636 1
566 1
Earnings Per Share [Abstract]
 
 
 
Basic earnings per share (Note 16)
$ 1.40 
$ 2.59 2
$ 2.31 2
Basic weighted average shares outstanding (Note 16)
245 
245 
245 
Diluted earnings per share (Note 16)
$ 1.39 
$ 2.58 2
$ 2.30 2
Diluted weighted average shares outstanding (Note 16)
245 
245 
245 
Class C common stock
 
 
 
Other Income (Expense)
 
 
 
Net income attributable to Visa Inc.
$ 130 1
$ 364 1
$ 451 1
Earnings Per Share [Abstract]
 
 
 
Basic earnings per share (Note 16)
$ 3.17 
$ 5.18 2
$ 4.03 2
Basic weighted average shares outstanding (Note 16)
41 
70 
112 
Diluted earnings per share (Note 16)
$ 3.16 
$ 5.16 2
$ 4.01 2
Diluted weighted average shares outstanding (Note 16)
41 
70 
112 
CONSOLIDATED BALANCE SHEETS CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Millions, except Per Share data, unless otherwise specified
Sep. 30, 2012
Sep. 30, 2011
Preferred stock
 
 
Preferred stock, par value
$ 0.0001 
$ 0.0001 
Preferred stock, shares authorized
25 
25 
Preferred stock, shares issued
0 
0 
Class A common stock
 
 
Common stock, par value
$ 0.0001 
$ 0.0001 
Common stock, shares authorized
2,001,622 
2,001,622 
Common stock, shares, issued
535 
520 
Common stock, shares, outstanding
535 
520 
Class B common stock
 
 
Common stock, par value
$ 0.0001 
$ 0.0001 
Common stock, shares authorized
622 
622 
Common stock, shares, issued
245 
245 
Common stock, shares, outstanding
245 
245 
Class C common stock
 
 
Common stock, par value
$ 0.0001 
$ 0.0001 
Common stock, shares authorized
1,097 
1,097 
Common stock, shares, issued
31 
47 
Common stock, shares, outstanding
31 
47 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Net income including non-controlling interest
$ 2,142 
$ 3,646 
$ 2,964 
Investment securities, available-for-sale
 
 
 
Net unrealized gain (loss)
4 
(1)
(10)
Income tax effect
(1)
0 
4 
Reclassification adjustment for net (gain) loss realized in net income including non-controlling interest
0 
(4)
(1)
Income tax effect
0 
2 
0 
Defined benefit pension and other postretirement plans
0 
(117)
35 
Income tax effect
0 
46 
(14)
Derivative instruments classified as cash flow hedges
 
 
 
Net unrealized gain (loss)
3 
18 
(28)
Income tax effect
(1)
(9)
6 
Reclassification adjustment for net (gain) loss realized in net income including non-controlling interest
(14)
62 
61 
Income tax effect
7 
(13)
(21)
Foreign currency translation adjustments
7 
(9)
5 
Other comprehensive income (loss), net of tax
5 
(25)
37 
Comprehensive income including non-controlling interest
2,147 
3,621 
3,001 
Comprehensive loss attributable to non-controlling interest
2 
4 
2 
Comprehensive income attributable to Visa Inc.
$ 2,149 
$ 3,625 
$ 3,003 
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (USD $)
In Millions, except Share data
Total
USD ($)
Common Stock Class A
Common Stock Class B
Common Stock Class C
Additional Paid-In Capital
USD ($)
Treasury Stock
USD ($)
Accumulated Income (Deficit)
USD ($)
Accumulated Other Comprehensive Income (Loss)
USD ($)
Non-Controlling Interests
USD ($)
Beginning Balance at Sep. 30, 2009
$ 23,193 
 
 
 
$ 21,160 
$ (2)
$ 2,219 
$ (188)
$ 4 
Beginning Balance (in shares) at Sep. 30, 2009
 
470,000,000 
245,000,000 
131,000,000 1
 
 
 
 
 
Net income attributable to Visa Inc.
2,966 2
 
 
 
 
 
2,966 
 
 
Loss attributable to non-controlling interest
(2)
 
 
 
 
 
 
 
(2)
Other comprehensive income, net of tax
37 
 
 
 
 
 
 
37 
 
Comprehensive income including non-controlling interest
3,001 
 
 
 
 
 
 
 
 
Issuance of restricted share awards
 
1,000,000 
 
 
 
 
 
 
 
Conversion of class C common stock upon sale into public market
 
34,000,000 
 
(34,000,000)1
 
 
 
 
 
Share-based compensation (Note 17)
131 
 
 
 
131 
 
 
 
 
Excess tax benefit for share-based compensation
14 
 
 
 
14 
 
 
 
 
Cash proceeds from exercise of stock options (in shares)
 
1,000,000 
 
 
 
 
 
 
 
Cash proceeds from exercise of stock options
56 
 
 
 
56 
 
 
 
 
Restricted stock instruments settled in cash for taxes1
(14)
 
 
 
(14)
 
 
 
 
Cash dividends declared and paid, at a quarterly amount of $0.22 in 2012, $0.15 in 2011, and $0.125 in 2010 per as-converted share
(368)
 
 
 
 
 
(368)
 
 
Retirement of treasury stock
0 
 
 
 
(2)
2 
 
 
 
Repurchase of class A common stock (in shares)
 
(13,000,000)
 
 
 
 
 
 
 
Repurchase of class A common stock
(1,000)
 
 
 
(551)
 
(449)
 
 
Special IPO dividend received from cost-method investees
1 
 
 
 
1 
 
 
 
 
Investment in partially-owned consolidated subsidiary
0 
 
 
 
(1)
 
 
 
1 
Ending Balance at Sep. 30, 2010
25,014 
 
 
 
20,794 
0 
4,368 
(151)
3 
Ending Balance (in shares) at Sep. 30, 2010
 
493,000,000 
245,000,000 
97,000,000 1
 
 
 
 
 
Net income attributable to Visa Inc.
3,650 2
 
 
 
 
 
3,650 
 
 
Loss attributable to non-controlling interest
(4)
 
 
 
 
 
 
 
(4)
Other comprehensive income, net of tax
(25)
 
 
 
 
 
 
(25)
 
Comprehensive income including non-controlling interest
3,621 
 
 
 
 
 
 
 
 
Issuance of restricted share awards
 
1,000,000 
 
 
 
 
 
 
 
Vesting of restricted stock units and performance shares
 
1,000,000 
 
 
 
 
 
 
 
Conversion of class C common stock upon sale into public market
 
50,000,000 
 
(50,000,000)
 
 
 
 
 
Share-based compensation (Note 17)
154 
 
 
 
154 
 
 
 
 
Excess tax benefit for share-based compensation
18 
 
 
 
18 
 
 
 
 
Cash proceeds from exercise of stock options (in shares)
 
3,000,000 
 
 
 
 
 
 
 
Cash proceeds from exercise of stock options
99 
 
 
 
99 
 
 
 
 
Restricted stock instruments settled in cash for taxes (in shares)
 
(1,000,000)
 
 
 
 
 
 
 
Restricted stock instruments settled in cash for taxes
(22)
 
 
 
(22)
 
 
 
 
Cash dividends declared and paid, at a quarterly amount of $0.22 in 2012, $0.15 in 2011, and $0.125 in 2010 per as-converted share
(423)
 
 
 
 
 
(423)
 
 
Repurchase of class A common stock (in shares)
 
(27,000,000)
 
 
 
 
 
 
 
Repurchase of class A common stock
(2,024)
 
 
 
(1,135)
 
(889)
 
 
Investment in partially-owned consolidated subsidiary
0 
 
 
 
(1)
 
 
 
1 
Ending Balance at Sep. 30, 2011
26,437 
 
 
 
19,907 
0 
6,706 
(176)
0 
Ending Balance (in shares) at Sep. 30, 2011
 
520,000,000 
245,000,000 
47,000,000 1
 
 
 
 
 
Net income attributable to Visa Inc.
2,144 2
 
 
 
 
 
2,144 
 
 
Loss attributable to non-controlling interest
(2)
 
 
 
 
 
 
 
(2)
Other comprehensive income, net of tax
5 
 
 
 
 
 
 
5 
 
Comprehensive income including non-controlling interest
2,147 
 
 
 
 
 
 
 
 
Issuance of restricted share awards
 
1,000,000 
 
 
 
 
 
 
 
Conversion of class C common stock upon sale into public market
 
16,000,000 
 
(16,000,000)
 
 
 
 
 
Share-based compensation (Note 17)
147 
 
 
 
147 
 
 
 
 
Excess tax benefit for share-based compensation
71 
 
 
 
71 
 
 
 
 
Cash proceeds from exercise of stock options (in shares)
3,669,315 
4,000,000 
 
 
 
 
 
 
 
Cash proceeds from exercise of stock options
174 
 
 
 
174 
 
 
 
 
Restricted stock instruments settled in cash for taxes1
(40)
 
 
 
(40)
 
 
 
 
Cash dividends declared and paid, at a quarterly amount of $0.22 in 2012, $0.15 in 2011, and $0.125 in 2010 per as-converted share
(595)
 
 
 
 
 
(595)
 
 
Repurchase of class A common stock (in shares)
(22,800,000)
(6,000,000)
 
 
 
 
 
 
 
Repurchase of class A common stock
(710)
 
 
 
(264)
 
(446)
 
 
Purchase of non-controlling interest
(1)
 
 
 
(3)
 
 
 
2 
Ending Balance at Sep. 30, 2012
$ 27,630 
 
 
 
$ 19,992 
$ 0 
$ 7,809 
$ (171)
$ 0 
Ending Balance (in shares) at Sep. 30, 2012
 
535,000,000 
245,000,000 
31,000,000 1
 
 
 
 
 
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Parenthetical)
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Cash dividends declared and paid, quarterly, per as-converted share
$ 0.22 
$ 0.15 
$ 0.125 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Operating Activities
 
 
 
Net income including non-controlling interest
$ 2,142 
$ 3,646 
$ 2,964 
Adjustments to reconcile net income including non-controlling interest to net cash provided by (used in) operating activities:
 
 
 
Amortization of volume and support incentives
2,155 
1,880 
1,560 
Fair value adjustment for the Visa Europe put option
0 
(122)
(79)
Share-based compensation
147 
154 
131 
Excess tax benefit for share-based compensation
(71)
(18)
(14)
Depreciation and amortization of property, equipment and technology
333 
288 
265 
Litigation provision and accretion (Note 21)
4,101 
18 
(18)
Deferred income taxes
(1,690)
164 
249 
Other
(8)
(104)
(32)
Change in operating assets and liabilities:
 
 
 
Settlement receivable
(42)
(4)
203 
Accounts receivable
(161)
(79)
(7)
Client incentives
(1,757)
(1,857)
(1,386)
Other assets
(26)
2 
(42)
Accounts payable
(17)
29 
(21)
Settlement payable
270 
36 
(245)
Accrued and other liabilities
(227)
129 
165 
Accrued litigation
(140)
(290)
(1,002)
Net cash provided by operating activities
5,009 
3,872 
2,691 
Investing Activities
 
 
 
Purchases of property, equipment and technology
(376)
(353)
(241)
Proceeds from disposal of property, equipment and technology
2 
0 
3 
Investment securities, available-for-sale:
 
 
 
Purchases
(4,140)
(1,910)
(11)
Proceeds from sales and maturities
2,093 
129 
67 
Purchases of/contributions to other investments
(12)
(13)
(17)
Proceeds from sale of other investments
22 
116 
11 
Acquisition, net of cash received of $17, $22, and $147, respectively (See Note 5)
(3)
(268)
(1,805)
Distribution from money market investment
0 
0 
89 
Net cash used in investing activities
(2,414)
(2,299)
(1,904)
Financing Activities
 
 
 
Repurchase of class A common stock (Note 15)
(710)
(2,024)
(1,000)
Dividends paid (Note 15)
(595)
(423)
(368)
Deposits into litigation escrow account—retrospective responsibility plan (Note 3)
(1,715)
(1,200)
(500)
Payments from litigation escrow account—retrospective responsibility plan (Note 3)
140 
280 
280 
Cash proceeds from exercise of stock options
174 
99 
56 
Excess tax benefit for share-based compensation
71 
18 
14 
Principal payments on debt
0 
(44)
(12)
Principal payments on capital lease obligations
(6)
(10)
(12)
Payments for earn-out related to PlaySpan acquisition
(14)
0 
0 
Net cash (used in) provided by financing activities
(2,655)
(3,304)
(1,542)
Effect of exchange rate changes on cash and cash equivalents
7 
(9)
5 
Decrease in cash and cash equivalents
(53)
(1,740)
(750)
Cash and cash equivalents at beginning of year
2,127 
3,867 
4,617 
Cash and cash equivalents at end of year
2,074 
2,127 
3,867 
Supplemental Disclosure of Cash Flow Information
 
 
 
Income taxes paid, net of refunds
2,057 
1,731 
1,291 
Amounts included in accounts payable and accrued and other liabilities related to purchases of property, equipment, technology and intangible assets
67 
36 
31 
Interest payments on debt
$ 0 
$ 3 
$ 4 
CONSOLIDATED STATEMENTS OF CASH FLOWS CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Acquisition, cash received
$ 17 
$ 22 
$ 147 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Organization. In a series of transactions from October 1 to October 3, 2007, Visa Inc. ("Visa" or the "Company") undertook a reorganization in which Visa U.S.A. Inc. ("Visa U.S.A."), Visa International Service Association ("Visa International"), Visa Canada Corporation ("Visa Canada") and Inovant LLC ("Inovant") became direct or indirect subsidiaries of Visa and established the retrospective responsibility plan ("the October 2007 reorganization" or "reorganization"). See Note 3—Retrospective Responsibility Plan. The reorganization was reflected as a single transaction on October 1, 2007 using the purchase method of accounting with Visa U.S.A. as the accounting acquirer. Visa Europe Limited ("Visa Europe") did not become a subsidiary of Visa Inc., but rather remained owned and governed by its European member financial institutions. See Note 2—Visa Europe.
Visa is a global payments technology company that connects consumers, businesses, financial institutions and governments around the world to fast, secure and reliable electronic payments. Visa and its wholly-owned consolidated subsidiaries, including Visa U.S.A., Visa International, Visa Worldwide Pte. Limited (“VWPL”), Visa Canada, Inovant and CyberSource Corporation (“CyberSource”), operate one of the world's most advanced processing networks, VisaNet. The Company provides its clients with payment processing platforms that encompass consumer credit, debit, prepaid and commercial payments, and facilitates global commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses and government entities. The Company is not a bank and does not issue cards, extend credit or set rates and fees for consumers.
Consolidation and basis of presentation. The consolidated financial statements include the accounts of Visa and its consolidated entities and are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company consolidates its majority-owned and controlled entities, including variable interest entities (“VIEs”) for which the Company is the primary beneficiary. The Company's investments in VIEs have not been material to its consolidated financial statements as of and for the periods presented. Non-controlling interests are reported as a component of equity. All significant intercompany accounts and transactions are eliminated in consolidation.
The Company has one reportable segment, “Payment Services.” The Company’s activities are interrelated and each activity is dependent upon and supportive of the other. Accordingly, all significant operating decisions are based on analysis of Visa as a single global business.
Use of estimates. The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions about future events. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Future actual results could differ materially from these estimates. The use of estimates in specific accounting policies is described further below as appropriate.
Cash and cash equivalents. Cash and cash equivalents include cash and certain highly liquid investments with original maturities of 90 days or less from the date of purchase. Cash equivalents are primarily recorded at cost, which approximates fair value.
Restricted cash—litigation escrow. The Company maintains an escrow account from which settlements of, or judgments in, the covered litigation are paid. See Note 21—Legal Matters for a discussion of the covered litigation. The escrow funds are held in money market investments, together with the interest earned, less applicable taxes payable, and classified as restricted cash on the consolidated balance sheets. Interest earned on escrow funds is included in investment income, on the consolidated statements of operations.
Investments and fair value. The Company measures certain assets and liabilities at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are reported under a three-level valuation hierarchy. The classification of the Company’s financial assets and liabilities within the hierarchy is as follows:
Level 1—Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities. The Company’s Level 1 assets include cash equivalents (money market funds), U.S. Treasury securities and equity securities. See Note 4—Fair Value Measurements and Investments.
Level 2—Inputs to the valuation methodology can include: (1) quoted prices in active markets for similar (not identical) assets or liabilities; (2) quoted prices for identical or similar assets in non-active markets; (3) inputs other than quoted prices that are observable for the asset or liability; or (4) inputs that are derived principally from or corroborated by observable market data. The Company's Level 2 assets and liabilities include U.S. government-sponsored debt securities, commercial paper, corporate debt securities, and foreign exchange derivative instruments. See Note 4—Fair Value Measurements and Investments.
Level 3—Inputs to the valuation methodology are unobservable and cannot be corroborated by observable market data. Level 3 assets include the Company's investments in auction rate securities. Level 3 liabilities include the Visa Europe put option and the earn-out related to the PlaySpan acquisition. See Note 4—Fair Value Measurements and Investments.
In May 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2011-04, which provides common fair value measurement and disclosure requirements in accordance with U.S. GAAP and International Financial Reporting Standards (“IFRS”). The Company adopted ASU 2011-04 effective January 1, 2012. The adoption did not have a material impact on the consolidated financial statements. See Note 4—Fair Value Measurements and Investments.
Trading investment securities include mutual fund equity security investments related to various employee compensation and benefit plans. Trading activity in these investments is at the direction of the Company's employees. These investments are held in a trust and are not available for the Company's operational or liquidity needs. Interest and dividend income and changes in fair value are recorded in investment income, and offset in personnel expense on the consolidated statements of operations.
Available-for-sale investment securities include investments in debt and equity securities. These securities are recorded at cost at the time of purchase and are carried at fair value. The Company considers these securities to be available-for-sale to meet working capital and liquidity needs. Investments with original maturities of greater than 90 days and stated maturities of less than one year from the balance sheet date are classified as current assets, while those with stated maturities of greater than one year from the balance sheet date are classified as non-current assets. The majority of these investments, $3.3 billion, are classified as non-current as they have stated maturities of more than one year from the balance sheet date. However, these investments are generally available to meet short-term liquidity needs. Unrealized gains and losses are reported in accumulated other comprehensive income (loss) on the consolidated balance sheets until realized. The specific identification method is used to calculate realized gain or loss on the sale of marketable securities, which is recorded in investment income on the consolidated statements of operations. Dividend and interest income are recognized when earned and are included in investment income on the consolidated statements of operations.
The Company evaluates its debt and equity securities for other-than-temporary impairment, or OTTI, on an ongoing basis. When there has been a decline in fair value of a debt or equity security below amortized cost basis, the Company recognizes OTTI if (1) it has the intent to sell the security, (2) it is more likely than not that it will be required to sell the security before recovery of the amortized cost basis, or (3) it does not expect to recover the entire amortized cost basis of the security. The Company has not presented required separate disclosures because its gross unrealized loss positions in debt or equity securities for the periods presented are not material. The Company recognized $4 million of OTTI for available-for-sale securities during fiscal 2012. The Company had no OTTI for available-for-sale securities during fiscal 2011 and 2010.
The Company applies the equity method of accounting for investments in other entities when it holds between 20% and 50% ownership in the entity or when it exercises significant influence. Under the equity method, the Company’s share of each entity’s profit or loss is reflected in the other line within the other income (expense) caption on the consolidated statements of operations. The equity method of accounting is also used for flow-through entities such as limited partnerships and limited liability companies when the investment ownership percentage is equal to or greater than 5% of outstanding ownership interests, regardless of whether the Company has significant influence over the investees.
The Company applies the historical cost method of accounting for investments in other entities when it holds less than 20% ownership in the entity and does not exercise significant influence, or for flow-through entities when the investment ownership is less than 5% and the Company does not exercise significant influence. These investments consist of equity holdings in non-public companies and are recorded in other assets on the consolidated balance sheets.
The Company regularly reviews investments accounted for under the cost and equity methods for possible impairment, which generally involves an analysis of the facts and changes in circumstances influencing the investment, expectations of the entity’s cash flows and capital needs, and the viability of its business model.
Financial instruments. The Company considers the following to be financial instruments: cash and cash equivalents, restricted cash-litigation escrow, trading and available-for-sale investment securities, settlement receivable and payable, customer collateral, non-marketable equity investments, settlement risk guarantee, derivative instruments, the Visa Europe put option and the earn-out provision related to the PlaySpan acquisition. See Note 4—Fair Value Measurements and Investments.
Settlement receivable and payable. The Company operates systems for authorizing, clearing and settling payment transactions worldwide. U.S. dollar settlements are settled within the same day and do not result in a receivable or payable balance, while settlement currencies other than the U.S. dollar generally remain outstanding for one to two business days, resulting in amounts due from and to clients. These amounts are presented as settlement receivable and payable on the consolidated balance sheets, respectively.
Customer collateral. The Company holds cash deposits and other non-cash assets from certain clients in order to ensure their performance of settlement obligations arising from credit, debit and travelers cheque product clearings. The cash collateral assets are restricted and fully offset by corresponding liabilities and both balances are presented on the consolidated balance sheets. Non-cash collateral assets are held on behalf of the Company by a third party and are not recorded on the consolidated balance sheets. See Note 12—Settlement Guarantee Management.
Client incentives. The Company enters into incentive agreements with select clients and other business partners designed to build payments volume, increase product acceptance and win merchant preference to route transactions over our network. These incentives are primarily accounted for as reductions to operating revenues or as operating expenses if a separate identifiable benefit at fair value can be established. The Company generally capitalizes advance incentive payments under these agreements if select criteria are met. The capitalization criteria include the existence of future economic benefits to Visa, the existence of legally enforceable recoverability clauses, such as early termination clauses, management's ability and intent to enforce the recoverability clauses and the ability to generate future earnings from the agreement in excess of amounts deferred. Capitalized amounts are amortized over the shorter of the period of contractual recoverability or the corresponding period of economic benefit. Incentives not yet paid are accrued systematically and rationally based on management's estimate of each client's performance. These accruals are regularly reviewed and estimates of performance are adjusted, as appropriate, based on changes in performance expectations, actual client performance, amendments to existing contracts or the execution of new contracts.
Property, equipment and technology, net. Property, equipment and technology are recorded at historical cost less accumulated depreciation and amortization, which are computed on a straight-line basis over the asset’s estimated useful life. Depreciation and amortization of technology, furniture, fixtures and equipment are computed over estimated useful lives ranging from 2 to 7 years. Capital leases are amortized over the lease term and leasehold improvements are amortized over the shorter of the useful life of the asset or lease term. Building improvements are depreciated between 3 and 40 years, and buildings are depreciated over 40 years. Improvements that increase functionality of the asset are capitalized and depreciated over the asset’s remaining useful life. Land and construction-in-progress are not depreciated. Fully depreciated assets are retained in property, equipment and technology, net, until removed from service.
Technology includes purchased and internally developed software, including technology assets obtained through acquisitions. Internally developed software represents software primarily used by the VisaNet electronic payment network and CyberSource platform. Internal and external costs incurred during the preliminary project stage are expensed as incurred. Qualifying costs incurred during the application development stage are capitalized. Once the project is substantially complete and ready for its intended use these costs are amortized on a straight-line basis over the technology's estimated useful life. Acquired technology assets are initially recorded at fair value and amortized on a straight-line basis over the estimated useful life.
The Company evaluates the recoverability of long-lived assets for impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. If the sum of expected undiscounted future cash flows is less than the carrying amount of an asset or asset group, an impairment loss is recognized to the extent that the carrying amount of the asset or asset group exceeds its fair value.
Leases. The Company enters into operating and capital leases for the use of premises, software and equipment. Rent expense related to operating lease agreements which may or may not contain lease incentives is primarily recorded on a straight-line basis over the lease term.
Intangible assets, net. The Company records identifiable intangible assets at fair value on the date of acquisition and evaluates the useful life of each asset.
Finite-lived intangible assets primarily consist of customer relationships, reacquired rights, reseller relationships and tradenames obtained through acquisitions. Finite-lived intangible assets are amortized on a straight-line basis and are tested for recoverability if events or changes in circumstances indicate that their carrying amounts may not be recoverable. These intangibles have useful lives ranging from 1 to 15 years. No events or changes in circumstances indicate that impairment existed as of September 30, 2012. See Note 5—Acquisitions and Note 8—Intangible Assets, Net.
Indefinite-lived intangible assets consist of tradename, customer relationships and the Visa Europe franchise right acquired in the October 2007 reorganization. Intangible assets with indefinite useful lives are not amortized but are evaluated for impairment annually or more frequently if events or changes in circumstances indicate that impairment may exist. The Company tests each category of indefinite-lived intangible assets for impairment on an aggregate basis, which may require the allocation of cash flows and/or an estimate of fair value to the assets or asset group. Impairment exists if the fair value of the indefinite-lived intangible asset is less than the carrying value. The Company relies on a number of factors when completing impairment assessments, including a review of discounted future cash flows, business plans and the use of present value techniques.
The Company completed its annual impairment review of indefinite-lived intangible assets as of February 1, 2012, and concluded there was no impairment as of that date. No recent events or changes in circumstances indicate that impairment of the Company's indefinite-lived intangible assets existed as of September 30, 2012.
Goodwill. Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. Goodwill is not amortized but is evaluated for impairment at the reporting unit level annually as of February 1, or more frequently if events or changes in circumstances indicate that impairment may exist.
Effective October 1, 2011, the Company adopted ASU 2011-08, which allows the Company to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. This step serves as the basis for determining whether it is necessary to perform the two-step goodwill impairment test. The two-step test first compares the fair value of the reporting unit to its carrying value. If the fair value exceeds the carrying value, no impairment exists, and the second step is not performed. If the fair value is less than the carrying value, the second step is performed to compute the amount of the impairment by comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. The adoption did not have a material impact on the consolidated financial statements.
The Company evaluated its goodwill for impairment on February 1, 2012, and concluded there was no impairment as of that date. No recent events or changes in circumstances indicate that impairment existed as of September 30, 2012.
Accrued litigation. The Company evaluates the likelihood of an unfavorable outcome in legal or regulatory proceedings to which it is a party and records a loss contingency when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These judgments are subjective, based on the status of such legal or regulatory proceedings, the merits of the Company's defenses and consultation with corporate and external legal counsel. Actual outcomes of these legal and regulatory proceedings may differ materially from the Company's estimates. Litigation accruals associated with settled obligations to be paid over periods longer than one year are recorded at the present value of future payment obligations. The obligation is accreted to its full payment value with the corresponding accretion charge included in interest expense on the consolidated statements of operations. The Company expenses legal costs as incurred in professional fees. See Note 21—Legal Matters.
Revenue recognition. The Company's operating revenues are comprised principally of service revenues, data processing revenues, international transaction revenues and other revenues, reduced by costs incurred under client incentives arrangements. The Company recognizes revenue when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.
Service revenues consist primarily of revenues earned for providing clients with a supported global business infrastructure and for services which support the various product platforms that enable clients to deliver Visa products and payment services. Current quarter service revenues are primarily assessed using a calculation of pricing applied to the prior quarter's payments volume. The Company also earns revenues from assessments designed to support ongoing acceptance and volume growth initiatives, which are recognized in the same period the related volume is transacted.
Data processing revenues represent revenues earned for authorization, clearing, settlement, transaction processing services, network access and other maintenance and support services that facilitate transaction and information processing among the Company's clients globally and Visa Europe. Data processing revenues are also earned for transactions processed by CyberSource's online payment gateway and PlaySpan's virtual goods payment platform. Data processing revenues are recognized in the same period the related transactions occur or services are rendered.
International transaction revenues are earned for processing cross-border transactions, and currency conversion activities. Cross-border transactions arise when the cardholder's issuer country is different from the merchant's country. International transaction revenues are generally driven by cross-border payments and cash volume.
Other revenues consist primarily of license fees for use of the Visa brand, revenues earned from Visa Europe in connection with the Visa Europe Framework Agreement (see Note 2—Visa Europe), fees from cardholder services, licensing and certification and certain activities related to the Company's acquired entities. Other revenues also include optional service or product enhancements, such as extended cardholder protection and concierge services. Other revenues are recognized in the same period the related transactions occur or services are rendered.
Marketing. The Company expenses costs for the production of advertising as incurred. The cost of media advertising is expensed when the advertising takes place. Sponsorship costs are recognized over the period in which the Company benefits from the sponsorship rights. Promotional items are expensed as incurred, when the related services are received, or when the related event occurs.
Income taxes. The Company's income tax expense consists of two components: current and deferred. Current income tax expense represents taxes paid or payable for the current period. Deferred tax assets and liabilities are recognized to reflect the future tax consequences attributable to temporary differences between the financial statement carrying amounts and the respective tax basis of existing assets and liabilities, and operating loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. In assessing whether deferred tax assets are realizable, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. A valuation allowance is recorded for the portions that are not expected to be realized based on the level of historical taxable income, projections of future taxable income over the periods in which the temporary differences are deductible, and qualifying tax planning strategies.
Where interpretation of the tax law may be uncertain, the Company recognizes, measures and discloses income tax uncertainties. The Company accounts for interest expense and penalties related to uncertain tax positions in other income (expense) in the consolidated statements of operations. The Company files a consolidated federal income tax return and, in certain states, combined state tax returns. Foreign taxes paid have historically been deducted to reduce federal income taxes payable. The Company intends to elect to claim foreign tax credits in any given year if such election is beneficial to the Company.
Pension and other postretirement benefit plans. The Company’s defined benefit pension and other postretirement benefit plans are actuarially evaluated, incorporating various critical assumptions including the discount rate and the expected rate of return on plan assets (for qualified pension plans). The discount rate is based on a "bond duration matching" methodology, which reflects the matching of projected plan obligation cash flows to an average of high-quality corporate bond yield curves whose duration matches the projected cash flows. The expected rate of return on pension plan assets considers the current and expected asset allocation, as well as historical and expected returns on each plan asset class. Any difference between actual and expected plan experience, including asset return experience, in excess of a 10% corridor is recognized in net periodic pension cost over the expected average employee future service period, approximately 8 years for United States plans. Other assumptions involve demographic factors such as retirement age, mortality, attrition and the rate of compensation increases. The Company evaluates assumptions annually and modifies them as appropriate.
The Company recognizes the funded status of its benefit plans in its consolidated balance sheets as other assets, accrued liabilities, and other liabilities. The Company recognizes settlement losses when it settles pension benefit obligations, including making lump-sum cash payments to plan participants in exchange for their rights to receive specified pension benefits, when certain thresholds are met. See Note 11—Pension, Postretirement and Other Benefits.
Foreign currency remeasurement and translation. The Company's functional currency is the U.S. dollar for the majority of its foreign operations. Transactions denominated in currencies other than the applicable functional currency are converted to the functional currency at the exchange rate on the transaction date. At period end, monetary assets and liabilities are remeasured to the functional currency using exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are remeasured at historical exchange rates. Gains and losses related to conversion and remeasurement are recorded in general and administrative expense in the consolidated statements of operations.
For certain foreign operations, the Company's functional currency may be the local currency in which a foreign subsidiary executes its business transactions. Translation from the local currency to the U.S. dollar is performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for revenue and expense accounts using an average exchange rate for the period. Resulting translation adjustments are reported as a component of accumulated other comprehensive income (loss) on the consolidated balance sheets.
Derivative financial instruments. The Company uses forward foreign exchange contracts to reduce its exposure to foreign currency rate changes on non-functional currency denominated forecasted operational cash flows. Derivatives are carried at fair value on a gross basis in either prepaid and other current assets or accrued liabilities on the consolidated balance sheets. Gains and losses resulting from changes in fair value of derivative instruments are accounted for either in accumulated other comprehensive income (loss) on the consolidated balance sheets, or in the consolidated statements of operations (in the corresponding account where revenue or expense is hedged, or to general and administrative for hedge amounts determined to be ineffective) depending on whether they are designated and qualify for hedge accounting. Fair value represents the difference in the value of the derivative financial instruments at the contractual rate and the value at current market rates, and generally reflects the estimated amounts that the Company would receive or pay to terminate the contracts at the reporting date based on broker quotes for the same or similar instruments.
Additional disclosures that demonstrate how derivative instruments and related hedged items affect an entity's financial position, financial performance and cash flows have not been presented because the impact of derivative instruments is immaterial to the overall consolidated financial statements. See Note 13—Derivative Financial Instruments.
Guarantees and indemnifications. The Company recognizes an obligation at inception for guarantees and indemnifications that qualify for recognition, regardless of the probability of occurrence. The Company indemnifies issuing and acquiring clients from settlement losses suffered by the failure of any other customer to honor drafts, travelers cheques, or other instruments processed in accordance with Visa's operating regulations. The estimated fair value of the liability for settlement indemnification is included in accrued liabilities on the consolidated balance sheets and is described in Note 12—Settlement Guarantee Management. The Company also indemnifies Visa Europe for any claims brought against Visa Europe arising out of the provision of services by Visa's customer financial institutions, as described in Note 2—Visa Europe.
Share-based compensation. The Company recognizes share-based compensation cost using the fair value method of accounting. The Company recognizes compensation cost for awards with only service conditions on a straight-line basis over the requisite service period, which is generally the vesting period. Compensation cost for performance- and market-condition-based awards is recognized on a graded-vesting basis. The amount is initially estimated based on target performance and is adjusted as appropriate based on management's best estimate throughout the performance period. See Note 17—Share-based Compensation.
Earnings per share. The Company calculates earnings per share using the two-class method to reflect the different rights of each class and series of outstanding common stock. The dilutive effect of incremental common stock equivalents is reflected in diluted earnings per share by application of the treasury stock method. See Note 16—Earnings Per Share.
Recently Issued Accounting Pronouncements
In December 2010, the FASB issued ASU 2010-29, which provides requirements over pro forma revenue and earnings disclosures related to business combinations. The ASU requires disclosure of revenue and earnings of the combined business as if the combination occurred at the start of the prior annual reporting period only. The Company adopted ASU 2010-29 effective October 1, 2011. The adoption did not have a material impact on the consolidated financial statements.
In June 2011, the FASB issued ASU 2011-05, which impacts the presentation of comprehensive income. The guidance requires components of other comprehensive income to be presented with net income to arrive at total comprehensive income. This ASU impacts presentation only and does not impact the underlying components of other comprehensive income or net income. In December 2011, the FASB issued an amendment to ASU 2011-05, which defers the requirement to present components of reclassifications of other comprehensive income on the face of the income statement. All other components of ASU 2011-05 are effective October 1, 2012. Adoption is not expected to have a material impact on the consolidated financial statements.
In July 2012, the FASB issued ASU 2012-02, which will allow an entity to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test for indefinite-lived intangible assets. The standard will be adopted on October 1, 2012, and is not expected to have a material impact on the consolidated financial statements.
Visa Europe
Visa Europe
Note 2—Visa Europe
As part of Visa's October 2007 reorganization, Visa Europe exchanged its ownership interest in Visa International and Inovant for Visa common stock, a put-call option agreement and a Framework Agreement, as described below.
Visa Europe Put Option Agreement. The Company granted Visa Europe a perpetual put option, which if exercised, will require Visa to purchase all of the outstanding shares of capital stock of Visa Europe from its members. The Company is required to purchase the shares of Visa Europe no later than 285 days after exercise of the put option. The put option provides a formula for determining the purchase price of the Visa Europe shares, which, subject to certain adjustments, applies Visa Inc.'s forward price-to-earnings multiple, or the P/E ratio (as defined in the option agreement), at the time the option is exercised to Visa Europe's adjusted sustainable income for the forward 12-month period (as defined in the option agreement), or the adjusted sustainable income. The calculation of Visa Europe's adjusted sustainable income under the terms of the put option agreement includes potentially material adjustments for cost synergies and other negotiated items. Upon exercise, the key inputs to this formula, including Visa Europe's adjusted sustainable income, will be the result of negotiation between the Company and Visa Europe. The put option provides an arbitration mechanism in the event that the two parties are unable to agree on the ultimate purchase price.
The fair value of the put option represents the value of Visa Europe's option, which, under certain conditions, could obligate the Company to purchase its member equity interest for an amount above fair value. The fair value of the put option does not represent the actual purchase price that the Company may be required to pay if the option is exercised, which could be several billion dollars or more. While the put option is in fact non-transferable, its fair value represents the Company's estimate of the amount the Company would be required to pay a third-party market participant to transfer the potential obligation in an orderly transaction.
The fair value of the put option is computed by comparing the estimated strike price, under the terms of the Put agreement, to the estimated fair value of Visa Europe. The fair value of Visa Europe is defined as the estimated amount a third-party market participant might pay in an arm's-length transaction under normal business conditions. A probability of exercise assumption is applied to reflect the possibility that Visa Europe will never exercise its option.
The estimated fair value of the put option represents a Level 3 accounting estimate due to a lack of trading in active markets and a lack of observable inputs in measuring fair value. See Note 4—Fair Value Measurements and Investments. The valuation of the put option therefore requires substantial judgment. The most subjective of estimates applied in valuing the put option are the assumed probability that Visa Europe will elect to exercise its option and the estimated differential between the P/E ratio and the P/E ratio applicable to Visa Europe on a standalone basis at the time of exercise, which the Company refers to as the “P/E differential.”
Exercise of the put option is at the sole discretion of Visa Europe (on behalf of the Visa Europe shareholders pursuant to authority granted to Visa Europe, under its Articles of Association). The Company estimates the assumed probability of exercise based on reasonably available information including, but not limited to: (i) Visa Europe's stated intentions; (ii) indications that Visa Europe is preparing to exercise as reflected in its reported financial results; (iii) evaluation of market conditions, including the regulatory environment, that could impact the potential future profitability of Visa Europe; and (iv) qualitative factors applicable to Visa Europe's largest members, which could indicate a change in their need or desire to liquidate their investment holdings. Factors impacting the assumed P/E differential used in the calculation include material changes in the P/E ratio of Visa and those of a group of comparable companies used to estimate the forward price-to-earnings multiple applicable to Visa Europe.
The Company determined the fair value of the put option to be approximately $145 million at September 30, 2012 and 2011. In determining the fair value of the put option on these dates, the Company assumed a 40% probability of exercise by Visa Europe at some point in the future and an estimated long-term P/E differential at the time of exercise of 1.9x. During fiscal 2011, the Company reduced the value of the put option by $122 million, recording non-cash, non-operating other income in the consolidated statement of operations. The decrease in the value of the put option reflects the overall decrease in Visa's P/E during fiscal 2012 and 2011 as compared to fiscal 2010, and does not reflect any change in the likelihood that Visa Europe will exercise its option. Reductions in the fair value of the put option are recorded as non-cash other non-operating income in the Company's consolidated statements of operations.
The put option is exercisable at any time at the sole discretion of Visa Europe. As such, the put option liability is included in accrued liabilities on our consolidated balance sheet at September 30, 2012. Classification in current liabilities is not an indication of management's expectation of exercise and simply reflects the fact that the obligation resulting from the exercise of the instrument could become payable within 12 months.
Visa Call Option Agreement. Visa Europe granted to Visa a perpetual call option under which the Company may be entitled to purchase all of the share capital of Visa Europe. The Company may exercise the call option in the event of certain triggering events. These triggering events involve the performance of Visa Europe measured as an unremediated decline in the number of merchants or ATM's in the Visa Europe region that accepts Visa-branded products. The Company believes the likelihood of these triggers occurring is remote.
The Framework Agreement. The relationship between Visa and Visa Europe is governed by a Framework Agreement, which provides for trademark and technology licenses and bilateral services as described below.
The Company granted to Visa Europe exclusive, irrevocable and perpetual licenses to use the Visa trademarks and technology intellectual property owned by the Company and certain affiliates within the Visa Europe region for use in the field of financial services, payments, related information technology and information processing services and participation in the Visa system. Visa Europe may sublicense the Visa trademarks and technology intellectual property to its members and other sublicensees under agreed upon circumstances.
The base fee for these irrevocable and perpetual licenses is recorded in other revenues and was approximately $143 million per year for fiscal 2012, 2011 and 2010. This fee is eligible for adjustment annually based on the annual growth of the gross domestic product of the European Union, although the adjustment can never reduce the annual fee below $143 million. The Company determined through an analysis of the fee rates implied by the economics of the agreement that the base fee, as adjusted in future periods based on the growth of the gross domestic product of the European Union, approximates fair value.
In addition to the licenses, Visa provides Visa Europe with authorization, clearing and settlement services for cross-border transactions involving Visa Europe's region and the rest of the world. Visa Europe must comply with certain agreed upon global rules governing the interoperability of Visa's systems with the systems of Visa Europe as well as the use and interoperability of the Visa trademarks. The parties will also guarantee the obligations of their respective clients and members to settle transactions, manage certain relationships with sponsors, clients and merchants, and comply with rules relating to the operation of the Visa enterprise. The Company will indemnify Visa Europe for claims arising from activities in the field of financial payment and processing services brought outside Visa Europe's region and Visa Europe will indemnify Visa for any likewise claims brought within Visa Europe's region. The Company has not recorded liabilities associated with these obligations as the fair value of such obligations was determined to be nominal at September 30, 2012 and 2011, respectively. The Company has determined that the value of services exchanged as a result of these various agreements approximates fair value at September 30, 2012 and 2011, respectively.
Retrospective Responsibility Plan
Retrospective Responsibility Plan
Note 3—Retrospective Responsibility Plan
The Company has established several related mechanisms designed to address potential liability under certain litigation referred to as the “covered litigation." These mechanisms are included in and referred to as the retrospective responsibility plan, or the plan, and consist of a litigation escrow agreement, the conversion feature of the Company's shares of class B common stock, the indemnification obligations of the Visa U.S.A. members, an interchange judgment sharing agreement and a loss sharing agreement.
Covered litigation consists of:
•
The Discover Litigation. Discover Financial Services Inc. v. Visa U.S.A. Inc., Case No. 04-CV-07844 (S.D.N.Y) (settled); 
•
The American Express Litigation. American Express Travel Related Services Co., Inc. v. Visa U.S.A. Inc. et al., No. 04-CV-0897 (S.D.N.Y.), which we refer to as the American Express litigation (settled); 
•
The Attridge Litigation. Attridge v. Visa U.S.A. Inc. et al., Case No. CGC-04-436920 (Cal. Super.); 
•
The Interchange Litigation. In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 1:05-md-01720-JG-JO (E.D.N.Y.) or MDL 1720, including all cases currently included in MDL 1720, any other case that includes claims for damages relating to the period prior to our initial public offering that has been or is transferred for coordinated or consolidated pre-trial proceedings at any time to MDL 1720 by the Judicial Panel on Multidistrict Litigation or otherwise included at any time in MDL 1720 by order of any court of competent jurisdiction and Kendall v. Visa U.S.A., Inc. et al., Case No. CO4-4276 JSW (N.D. Cal.); and 
•
any claim that challenges the reorganization or the consummation thereof; provided that such claim is transferred for coordinated or consolidated pre-trial proceedings at any time to MDL 1720 by the Judicial Panel on Multidistrict Litigation or otherwise included at any time in MDL 1720 by order of any court of competent jurisdiction.
Litigation escrow agreement. In accordance with the litigation escrow agreement, the Company maintains an escrow account, from which settlements of, or judgments in, the covered litigation are paid. The amount of the escrow is determined by the board of directors and the Company's litigation committee, all members of which are affiliated with, or act for, certain Visa U.S.A. members. The escrow funds are held in money market investments along with the interest earned, less applicable taxes, and are classified as restricted cash on the consolidated balance sheets.
The following table sets forth the changes in the litigation escrow account:
 
Fiscal 2012
 
Fiscal 2011
 
(in millions)
Balance at October 1
$
2,857

 
$
1,936

Deposits into the litigation escrow account
1,715

 
1,200

American Express settlement payments
(140
)
 
(280
)
Interest earned, less applicable taxes
—

 
1

Balance at September 30
$
4,432

 
$
2,857

Individual Plaintiffs' Settlement Fund payment—(See Note 21—Legal Matters)
(350
)
 
 
Balance at October 29
$
4,082

 
 

An accrual for the covered litigation and a change to the litigation provision are recorded when loss is deemed to be probable and reasonably estimable. In making this determination, the Company evaluates available information, including but not limited to recommendations made by the litigation committee. The accrual related to the covered litigation could be either higher or lower than the litigation escrow account balance. The Company recorded an additional $4.1 billion accrual for the covered litigation during fiscal 2012. See Note 21—Legal Matters.
Conversion feature. Under the terms of the plan, when the Company funds the litigation escrow account, the shares of class B common stock are subject to dilution through an adjustment to the conversion rate of the shares of class B common stock to shares of class A common stock. This has the same effect on earnings per share as repurchasing the Company's class A common stock, by reducing the class B conversion rate and consequently the as-converted class A common stock share count. See Note 15—Stockholders' Equity.
Indemnification obligations. To the extent that amounts available under the litigation escrow arrangement and agreements in the plan are insufficient to fully resolve the covered litigation, the Company will use commercially reasonable efforts to enforce the indemnification obligations of Visa U.S.A.'s members for such excess amount, including but not limited to enforcing indemnification obligations pursuant to Visa U.S.A.'s certificate of incorporation and bylaws and in accordance with their membership agreements.
Interchange judgment sharing agreement. Visa U.S.A. and Visa International have entered into an interchange judgment sharing agreement with certain Visa U.S.A. members that have been named as defendants in the interchange litigation, which is described in Note 21—Legal Matters. Under this judgment sharing agreement, Visa U.S.A. members that are signatories will pay their membership proportion of the amount of a final judgment not allocated to the conduct of MasterCard.
Loss sharing agreement. Visa has entered into a loss sharing agreement with Visa U.S.A., Visa International and certain Visa U.S.A. members. The loss sharing agreement provides for the indemnification of Visa U.S.A., Visa International and, in certain circumstances, Visa with respect to: (i) the amount of a final judgment paid by Visa U.S.A. or Visa International in the covered litigation after the operation of the interchange judgment sharing agreement, plus any amounts reimbursable to the interchange judgment sharing agreement signatories; or (ii) the damages portion of a settlement of a covered litigation that is approved as required under Visa U.S.A.'s certificate of incorporation by the vote of Visa U.S.A.'s specified voting members. The several obligation of each bank that is a party to the loss sharing agreement will equal the amount of any final judgment enforceable against Visa U.S.A., Visa International or any other signatory to the interchange judgment sharing agreement, or the amount of any approved settlement of a covered litigation, multiplied by such bank's then-current membership proportion as calculated in accordance with Visa U.S.A.'s certificate of incorporation.
Omnibus agreement. Visa entered into an omnibus agreement with MasterCard and certain Visa U.S.A. members that confirmed and memorialized the signatories’ intentions with respect to the loss sharing agreement, the interchange judgment sharing agreement and other agreements relating to the interchange litigation. The Visa portion of a settlement or judgment in the interchange litigation covered by the omnibus agreement would be allocated in accordance with specified provisions of the retrospective responsibility plan. See Note 21—Legal Matters.
Fair Value Measurements and Investments
Fair Value Measurements and Investments
Note 4—Fair Value Measurements and Investments
Fair Value Measurements
The Company measures certain assets and liabilities at fair value. See Note 1—Summary of Significant Accounting Policies.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
 
Fair Value Measurements at September 30
Using Inputs Considered as
 
Level 1
 
Level 2
 
Level 3
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
 
(in millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents and restricted cash
 
 
 
 
 
 
 
 
 
 
 
Money market funds
$
5,676

 
$
4,225

 
 
 
 
 
 
 
 
U.S. government-sponsored debt securities
 
 
 
 
$
—

 
$
175

 
 
 
 
Commercial paper
 
 
 
 
93

 
—

 
 
 
 
Investment securities
 
 
 
 
 
 
 
 
 
 
 
U.S. government-sponsored debt securities
 
 
 
 
2,821

 
1,568

 
 
 
 
U.S. Treasury securities
1,066

 
350

 
 
 
 
 
 
 
 
Equity securities
68

 
57

 
 
 
 
 
 
 
 
Corporate debt securities
 
 
 
 
63

 
—

 
 
 
 
Auction rate securities
 
 
 
 
 
 
 
 
$
7

 
$
7

Prepaid and other current assets
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange derivative instruments
 
 
 
 
13

 
30

 
 
 
 
 
$
6,810

 
$
4,632

 
$
2,990

 
$
1,773

 
$
7

 
$
7

Liabilities
 
 
 
 
 
 
 
 
 
 
 
Accrued liabilities
 
 
 
 
 
 
 
 
 
 
 
Visa Europe put option
 
 
 
 
 
 
 
 
$
145

 
$
145

Earn-out related to PlaySpan acquisition
 
 
 
 
 
 
 
 
12

 
24

Foreign exchange derivative instruments
 
 
 
 
$
11

 
$
7

 
 
 
 

There were no significant transfers between Level 1 and Level 2 assets during fiscal 2012.
Level 1 assets measured at fair value on a recurring basis. Cash equivalents (money market funds), U.S. Treasury securities and equity securities are classified as Level 1 within the fair value hierarchy, as fair value is based on quoted prices in active markets.
Level 2 assets and liabilities measured at fair value on a recurring basis. The fair value of government-sponsored and corporate debt securities, as provided by third-party pricing vendors, is based on quoted prices in active markets for similar assets. The pricing data obtained from outside sources is reviewed internally for reasonableness, compared against benchmark quotes from additional pricing sources and confirmed or revised accordingly. Commercial paper and foreign exchange derivative instruments are valued using inputs that are observable in the market or can be derived principally from or corroborated with observable market data. There were no substantive changes to the valuation techniques and related inputs used to measure fair value during fiscal 2012.
Level 3 assets and liabilities measured at fair value on a recurring basis. Auction rate securities are classified as Level 3 due to a lack of trading in active markets and a lack of observable inputs in measuring fair value. There were no substantive change to the valuation techniques and related inputs used to measure fair value during fiscal 2012.
Visa Europe put option agreement. The Company has granted Visa Europe a perpetual put option which is carried at fair value in accrued liabilities on the consolidated balance sheets. The fair value of the put option was $145 million at September 30, 2012 and 2011. During fiscal 2011, the Company reduced the value of the put option by $122 million, recording non-cash, non-operating income in the consolidated statement of operations. See Note 2—Visa Europe. The liability is classified within Level 3 as the assumed probability that Visa Europe will elect to exercise its option and the estimated P/E differential are among several unobservable inputs used to value the put option.
Earn-out related to PlaySpan acquisition. In connection with the PlaySpan acquisition, the Company initially recorded a liability of $24 million to reflect the fair value of a potential earn-out provision included in the purchase agreement. The liability is classified as Level 3 due to a lack of observable inputs, such as the likelihood of meeting certain future revenue targets and other milestones. The fair value of the earn-out decreased to $12 million at September 30, 2012, primarily reflecting payments made upon achievement of certain revenue targets and other milestones during fiscal 2012. The remaining liability related to the earn-out is included in accrued liabilities on the consolidated balance sheets. Changes in fair value are included in general and administrative expense on the consolidated statements of operations. See Note 5—Acquisitions and Note 8—Intangible Assets, Net.
A separate roll-forward of Level 3 investments measured at fair value on a recurring basis is not presented because the primary activities during fiscal 2012 and 2011 are already discussed above.
Assets Measured at Fair Value on a Nonrecurring Basis
Non-marketable equity investments and investments accounted for under the equity method. These investments are classified as Level 3 due to the absence of quoted market prices, inherent lack of liquidity, and the fact that inputs used to measure fair value are unobservable and require management judgment. When certain events or circumstances indicate that impairment may exist, the Company revalues the investments using various assumptions, including the financial metrics and ratios of comparable public companies. The Company recognized a $2 million OTTI during fiscal 2012, compared with no impairment charges during fiscal 2011 and $3 million impairment loss recognized during fiscal 2010. At September 30, 2012 and 2011, these investments totaled $86 million and $100 million, respectively. These assets are classified in other assets on the consolidated balance sheets. See Note 6—Prepaid Expenses and Other Assets.
Non-financial assets and liabilities. Long-lived assets such as goodwill, indefinite-lived intangible assets, finite-lived intangible assets, and property, equipment and technology are considered non-financial assets. The Company does not have any non-financial liabilities measured at fair value on a nonrecurring basis. Finite-lived intangible assets primarily consist of customer relationships, reacquired rights, reseller relationships and tradenames obtained through acquisitions. See Note 5—Acquisitions.
The Company primarily uses an income approach for estimating the fair values of goodwill and indefinite-lived intangible assets when testing for and recording impairment, if any. As the assumptions employed to measure these assets on a non-recurring basis are based on management's judgment using internal and external data, these fair value determinations are classified in Level 3 of the fair value hierarchy. The Company completed its annual impairment review of its indefinite-lived intangible assets and goodwill as of February 1, 2012, and concluded there was no impairment. No recent events or changes in circumstances indicate that impairment existed at September 30, 2012. See Note 1—Summary of Significant Accounting Policies.
Other Financial Instruments not Measured at Fair Value
Certain financial instruments are not measured at fair value on the Company's consolidated balance sheet but require disclosure of their fair values, including cash, settlement receivable and payable, and customer collateral. The estimated fair value of such instruments at September 30, 2012, approximates their carrying value due to their generally short maturities.
Investments
Trading Investment Securities
Trading investment securities include mutual fund equity security investments related to various employee compensation and benefit plans. Trading activity in these investments is at the direction of the Company's employees. These investments are held in a trust and are not available for the Company's operational or liquidity needs. See Note 1—Summary of Significant Accounting Policies. As of September 30, 2012 and 2011, trading investment securities totaled $66 million and $57 million, respectively.
Available-for-sale Investment Securities
The amortized cost, unrealized gains and losses and fair value of available-for-sale investment securities are as follows:
 
September 30, 2012

 
September 30, 2011

 
Amortized
Cost
 
Gross Unrealized
 
Fair
Value
 
Amortized
Cost
 
Gross Unrealized
 
Fair
Value
 
Gains
 
Losses
 
Gains
 
Losses
 
 
(in millions)
U.S. Treasury securities
$
1,065

 
$
1

 
$
—

 
$
1,066

 
$
350

 
$
—

 
$
—

 
$
350

U.S. government-sponsored debt securities
2,818

 
3

 
—

 
2,821

 
1,568

 
—

 
—

 
1,568

Corporate debt securities
63

 
—

 
—

 
63

 
—

 
—

 
—

 
—

Auction rate and equity securities
11

 
—

 
(1
)
 
10

 
7

 
—

 
—

 
7

Total
$
3,957

 
$
4

 
$
(1
)
 
$
3,960

 
$
1,925

 
$
—

 
$
—

 
$
1,925

Less: current portion of available-for-sale investment securities
 
 
 
 
 
 
(677
)
 
 
 
 
 
 
 
(1,214
)
Long-term available-for-sale investment securities
 
 
 
 
 
 
$
3,283

 
 
 
 
 
 
 
$
711

The available-for-sale investment securities primarily include U.S. Treasury securities, U.S. government-sponsored debt securities and corporate debt securities. Available-for-sale debt securities are presented below in accordance with their stated maturities. The majority of these investments, $3.3 billion, are classified as non-current, as they have stated maturities of more than one year from the balance sheet date. However, these investments are generally available to meet short-term liquidity needs.
 
Amortized Cost
 
Fair Value
 
(in millions)
September 30, 2012:
 
 
 
Due within one year
$
674

 
$
674

Due after 1 year through 5 years
3,272

 
3,276

Due after 5 years through 10 years
—

 
—

Due after 10 years
7

 
7

Total
$
3,953

 
$
3,957


Investment Income
Investment income consisted of the following:
 
For the Years Ended
September 30,
 
2012
 
2011
 
2010
 
(in millions)
Interest and dividend income on cash and investments
$
17

 
$
16

 
$
26

Gain on other investments
17

 
92

 
20

Investment securities—trading:
 
 
 
 
 
Unrealized (losses) gains, net
9

 
(5
)
 
3

Realized gains (losses), net
(1
)
 
1

 
1

Investment securities—available-for-sale:
 
 
 
 
 
Realized gains (losses), net
—

 
4

 
2

Other-than-temporary impairment on investments
(6
)
 
—

 
(3
)
Investment income
$
36

 
$
108

 
$
49


The gain on other investments in fiscal 2011 primarily includes the pre-tax gain from the sale of the Company's equity interest in Visa Vale issuer Companhia Brasileira de Soluções e Serviços, or CBSS, of $85 million. The gain on other investments in fiscal 2010 includes the pre-tax gain of $20 million related to the Company's investment in the Reserve Primary Fund.
Acquisitions
Acquisitions
Note 5—Acquisitions
The consolidated financial statements include the operating results of Fundamo, PlaySpan and CyberSource from the date of the respective acquisition. None of the additional goodwill recognized in these acquisitions is expected to be deductible for tax purposes.
Fundamo Acquisition. On June 9, 2011, the Company acquired Fundamo, a leading platform provider of mobile financial services for mobile network operators and financial institutions in developing economies. The acquisition was made to accelerate the execution of Visa's global strategy to provide for the next generation of payments solutions and to provide long-term growth opportunities to connect billions of unbanked or under-banked consumers to each other and to the global economy with a secure, reliable and globally accepted form of payment.
Total purchase consideration was $110 million, paid with cash on hand. The following table summarizes the purchase price allocation.
 
Fair Value
 
(in millions)
Tangible assets, net (1)
$
27

Finite-lived intangible assets with a weighted-average useful life of 5 years
5

Goodwill
80

Net deferred tax liabilities
(2
)
Net assets acquired
$
110

(1) 
Tangible assets, net, include $25 million of technology assets acquired, which have a useful life of 5 years and are recognized in property, equipment and technology, net, on the consolidated balance sheets.
PlaySpan Acquisition. On March 1, 2011, the Company acquired PlaySpan, a privately held company whose payments platform processes transactions for digital goods in online games, digital media and social networks around the world. The acquisition of PlaySpan was made to extend Visa's capabilities in digital, eCommerce and mobile commerce in order to expand the scope of payment services available to clients and consumers.
The following table presents the total purchase consideration for the PlaySpan acquisition.
 
Potential
Purchase
Consideration
 
Accounting
Purchase
Consideration
 
(in millions)
Cash paid
$
180

 
$
180

Earn-out provision(1)
40

 
40

Less: Employee compensation(2)
 
 
(12
)
Valuation adjustment(3)
 
 
(4
)
Fair value of earn-out provision (See Note 4—Fair Value Measurements and Investments)
 
 
24

Fair value of stock options issued(4)
5

 
 
Total purchase consideration
$
225

 
$
204

(1) 
The acquisition agreement includes a potential earn-out provision of up to $40 million, should PlaySpan achieve certain revenue targets and other milestones.
(2) 
The amount reflects personnel expense related to the earn-out provision incurred during the performance period.
(3) 
Adjustment to reflect the earn-out provision at fair value based on the assumed likelihood of the future revenue targets and other milestones being met.
(4) 
The Company issued non-qualified stock options to replace unvested, in-the-money stock options held by PlaySpan employees. See Note 17—Share-based Compensation.
The following table summarizes the allocation of the accounting purchase consideration.
 
Fair Value
 
(in millions)
Tangible assets, net(1)
$
67

Finite-lived intangible assets with a weighted-average useful life of 2.8 years
15

Goodwill
141

Net deferred tax liabilities
(19
)
Net assets acquired
$
204

(1) 
Tangible assets, net, include $56 million of technology assets acquired, which have a weighted-average useful life of 5 years and are recognized in property, equipment and technology, net, on the consolidated balance sheets.
CyberSource Acquisition. On July 21, 2010, the Company completed its acquisition of all of the outstanding shares of common stock of CyberSource Corporation, a leading provider of electronic payment, risk management and payment security solutions to online merchants. The acquisition was executed to accelerate the growth of Visa's eCommerce category and enhance the value of the Company's network, product and service offerings to financial institutions, merchants, partners and consumers.
Total purchase consideration was approximately $2 billion, paid with cash on hand as follows:
 
Purchase Consideration
 
(in millions)
Acquisition of approximately 72 million shares of outstanding common stock of CyberSource at $26.00 per share
$
1,866

Fair value of earned stock options settled
86

Total purchase price
$
1,952


Total purchase consideration has been allocated to the tangible and identifiable intangible assets and to liabilities assumed based on their respective fair values on the acquisition date. Excess purchase consideration over net assets assumed was recorded as $1.2 billion of goodwill, which represents the value that is expected from expanding the Company's online payment and related fraud and security management capabilities, and other synergies. The Company allocates goodwill to reporting units based on the reporting unit expected to benefit from the acquisition. Of the $1.2 billion, approximately $0.8 billion was allocated to a second reporting unit. The remainder was allocated to the Company's original reporting unit to reflect the incremental growth and synergy this acquisition will provide to the Company's existing business. The following table summarizes the purchase price allocation.
 
Fair Value
Tangible assets and liabilities
(in millions)
Current assets
$
259

Non-current assets(1)
150

Current liabilities
(45
)
Non-current liabilities
(256
)
Intangible assets
605

Goodwill
1,239

Net assets acquired
$
1,952

(1) 
Non-current assets include $122 million of technology assets acquired, which have a weighted-average useful life of 7 years and are recognized in property, equipment and technology, net, on the consolidated balance sheets.
The following table summarizes the fair value of the acquired intangible assets. See Note 8—Intangible Assets, Net.
 
Fair Value
 
Weighted-Average
Useful Life
 
(in millions)
 
 
Customer relationships
$
320

 
10

Reseller relationships
95

 
9

Tradenames
190

 
15

Total amortizable intangible assets
$
605

 
12


In connection with the acquisition, unvested in-the-money stock options held by CyberSource employees on the acquisition date were terminated and replaced with approximately 1.6 million of the Company’s non-qualified stock options, with a total fair value of approximately $46 million to be expensed over a period of three years from the original grant date of the CyberSource options. See Note 17—Share-based Compensation. The Company also expensed as incurred approximately $13 million of acquisition-related costs during fiscal 2010, which consisted primarily of professional fees related to closing the transaction. There was no contingent consideration related to the acquisition.
Prepaid Expenses and Other Assets
Prepaid Expenses and Other Assets
Note 6—Prepaid Expenses and Other Assets
Prepaid expenses and other current assets consisted of the following:
 
September 30,
2012
 
September 30,
2011
 
(in millions)
Prepaid expenses and maintenance
$
69

 
$
96

Income tax receivable—(See Note 20—Income Taxes)
179

 
112

Foreign exchange derivative instruments—(See Note 13—Derivative Financial Instruments)
13

 
30

Other
40

 
27

Total
$
301

 
$
265


Other non-current assets consisted of the following: 
 
September 30,
2012
 
September 30,
2011
 
(in millions)
Other investments—(See Note 4—Fair Value Measurements and Investments)
$
86

 
$
100

Pension asset—(See Note 11—Pension, Postretirement and Other Benefits)
23

 
—

Long-term prepaid expenses and other
42

 
29

Total
$
151

 
$
129

Property, Equipment and Technology, Net
Property, Equipment and Technology, Net
Note 7—Property, Equipment and Technology, Net
Property, equipment and technology, net, consisted of the following:
 
September 30,
2012
 
September 30,
2011
 
(in millions)
Land
$
71

 
$
71

Buildings and building improvements
751

 
719

Furniture, equipment and leasehold improvements
837

 
755

Construction-in-progress
69

 
89

Technology
1,353

 
1,115

Total property, equipment and technology
3,081

 
2,749

Accumulated depreciation and amortization
(1,447
)
 
(1,208
)
Property, equipment and technology, net
$
1,634

 
$
1,541


Increases to net property, equipment and technology in fiscal 2012 primarily reflect the Company's investment in payments system infrastructure. Technology consists of both purchased and internally developed software. Internally developed software primarily represents software utilized by VisaNet. At September 30, 2012 and 2011, accumulated amortization for technology was $812 million and $677 million, respectively.
At September 30, 2012, estimated future amortization expense on technology was as follows:
Fiscal (in millions)
2013
 
2014
 
2015
 
2016
 
2017 and
thereafter
 
Total
Estimated future amortization expense
$
148

 
$
132

 
$
120

 
$
88

 
$
53

 
$
541

Depreciation and amortization expense related to property, equipment and technology was $265 million, $225 million and $265 million for fiscal 2012, 2011 and 2010, respectively. Included in those amounts was amortization expense on technology of $132 million, $102 million and $137 million for fiscal 2012, 2011 and 2010, respectively.
Intangible Assets, Net
Intangible Assets, Net
Note 8—Intangible Assets, Net
At September 30, 2012 and 2011, the Company’s indefinite-lived intangible assets consisted of customer relationships of $6.8 billion, Visa tradename of $2.6 billion and a Visa Europe franchise right of $1.5 billion, all of which were acquired as part of the Company’s October 2007 reorganization. Customer relationships represent the value of relationships with clients outside of the U.S., excluding the European Union. Tradename represents the value of the Visa brand outside of the U.S., excluding the European Union. Visa Europe’s franchise right represents the value of the right to franchise the use of the Visa brand, use of Visa technology and access to the overall Visa network in the European Union.
The Company acquired finite-lived intangible assets primarily related to the CyberSource, PlaySpan and Fundamo acquisitions during fiscal 2011 and 2010. See Note 5—Acquisitions.
Indefinite-lived and finite-lived intangible assets consisted of the following: 
 
September 30, 2012
 
September 30, 2011
 
Gross
 
Accumulated
Amortization
 
Net
 
Gross
 
Accumulated
Amortization
 
Net
 
(in millions)
Finite-lived intangible assets
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
$
339

 
$
(84
)
 
$
255

 
$
337

 
$
(44
)
 
$
293

Tradenames
192

 
(28
)
 
164

 
192

 
(15
)
 
177

Reseller relationships
95

 
(25
)
 
70

 
95

 
(13
)
 
82

Other
52

 
(4
)
 
48

 
2

 
(1
)
 
1

Total finite-lived intangible assets
$
678

 
$
(141
)
 
$
537

 
$
626

 
$
(73
)
 
$
553

Indefinite-lived intangible assets
 
 
 
 
$
10,883

 
 
 
 
 
$
10,883

Total intangible assets, net
 
 
 
 
$
11,420

 
 
 
 
 
$
11,436


Amortization expense related to finite-lived intangible assets was $68 million, $63 million and $10 million for fiscal 2012, 2011 and 2010, respectively. At September 30, 2012, estimated future amortization expense on finite-lived intangible assets is as follows:
Fiscal (in millions)
2013
 
2014
 
2015
 
2016
 
2017 and
thereafter
 
Total
Estimated future amortization expense
$
69

 
$
66

 
$
62

 
$
49

 
$
291

 
$
537


There was no impairment related to the Company’s indefinite-lived or finite-lived intangible assets during fiscal 2012, 2011 or 2010.
Accrued and Other Liabilities
Accrued and Other Liabilities
Note 9—Accrued and Other Liabilities
Accrued liabilities consisted of the following:
 
September 30,
2012
 
September 30,
2011
 
(in millions)
Accrued operating expenses
$
194

 
$
175

Visa Europe put option—(See Note 2—Visa Europe)(1)
145

 
145

Deferred revenue
59

 
63

Accrued marketing and product expenses
22

 
36

Accrued income taxes—(See Note 20—Income taxes)
58

 
63

Other
106

 
80

Total
$
584

 
$
562


Other long-term liabilities consisted of the following:
 
September 30,
2012
 
September 30,
2011
 
(in millions)
Accrued income taxes—(See Note 20—Income Taxes)
$
171

 
$
468

Employee benefits
93

 
106

Other
107

 
93

Total
$
371

 
$
667

(1) 
The put option is exercisable at any time at the sole discretion of Visa Europe with payment required 285 days thereafter. Classification in current liabilities is not an indication of management’s expectation of exercise and simply reflects the fact that the obligation resulting from the exercise of the instrument could become payable within 12 months.
Debt
Debt
Note 10—Debt
U.S. Commercial Paper Program. Visa maintains a U.S. commercial paper program to support its working capital requirements and for general corporate purposes. This program allows the Company to issue up to $500 million of unsecured debt securities, with maturities up to 270 days from the date of issuance and at interest rates generally extended to companies with comparable credit ratings. The Company had no outstanding obligations under this program during and at the end of fiscal 2012 and 2011.
Revolving Credit Facilities. In 2008, Visa entered into a $3.0 billion five-year revolving credit facility (the “February 2008 Agreement”). The February 2008 Agreement matures on February 15, 2013, and contains covenants and events of defaults customary for facilities of this type. The participating lenders in this revolving credit facility include affiliates of certain holders of the Company’s class B and class C common stock and certain of the Company’s clients or affiliates of its clients. This revolving credit facility is maintained to provide liquidity in the event of settlement failures by the Company's clients, to back up the commercial paper program and for general corporate purposes.
Loans under the five-year facility may be in the form of: (1) Base Rate Advance, which will bear interest at a rate equal to the higher of the Federal Funds Rate plus 0.5% and the Bank of America prime rate; (2) Eurocurrency Advance, which will bear interest at a rate equal to LIBOR (as adjusted for applicable reserve requirements) plus an applicable cost adjustment and an applicable margin of 0.11% to 0.30% based on our credit rating; or (3) U.S. Swing Loan, Euro Swing Loan, or Foreign Currency Swing Loan, which will bear interest at the rate equal to the applicable Swing Loan rate for that currency plus the same applicable margin plus additionally for Euro and Sterling loans, an applicable reserve requirement and cost adjustment. The Company also agrees to pay a facility fee on the aggregate commitment amount, whether used or unused, at a rate ranging from 0.04% to 0.10% and a utilization fee on loans at a rate ranging from 0.05% to 0.10% based on the Company’s credit rating. Currently, the applicable margin is 0.15%, the facility fee is 0.05% and the utilization fee is 0.05%.
There were no borrowings under the revolving credit facility and the Company was in compliance with all related covenants during and at the end of fiscal 2012 and 2011.
Pension, Postretirement and Other Benefits
Pension, Postretirement and Other Benefits
The Company sponsors various qualified and non-qualified defined benefit pension and other postretirement benefit plans that provide for retirement and medical benefits for substantially all employees residing in the United States. The Company uses a September 30 measurement date for its pension and other postretirement benefit plans.
Defined Benefit Pension Plan
The defined benefit pension plan benefits are based on years of service, age, and eligible compensation. Prior to January 1, 2011, employees hired before January 1, 2008, earned benefits based on their pay during their last five years of employment. Employees hired or rehired on or after January 1, 2008, earned benefits based on a cash balance formula. Effective January 1, 2011, all employees began accruing benefits under the cash balance formula and ceased accruing benefits under any other formula. An employee’s cash balance account is credited with an amount equal to 6% of eligible compensation plus interest based on 30-year Treasury securities. The funding policy is to contribute annually no less than the minimum required contribution under ERISA. 
Postretirement Benefits Plan
The postretirement benefits plan provides medical benefits for retirees and dependents who meet minimum age and service requirements. Benefits are provided from retirement date until age 65. Retirees must contribute on a monthly basis for the same coverage that is generally available to active employees and their dependents. The Company’s contributions are funded on a current basis.
Summary of Plan Activities
Change in Benefit Obligation:
 
Pension Benefits
 
Other
Postretirement Benefits
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
 
(in millions)
Benefit obligation—beginning of fiscal year
$
839

 
$
743

 
$
38

 
$
34

Service cost
38

 
41

 
—

 
—

Interest cost
40

 
38

 
1

 
1

Actuarial loss (gain)
132

 
77

 
(3
)
 
7

Benefit payments
(60
)
 
(63
)
 
(4
)
 
(4
)
Settlements
1

 
3

 
—

 
—

Benefit obligation—end of fiscal year
$
990

 
$
839

 
$
32

 
$
38

Accumulated benefit obligation
$
982

 
$
839

 
NA

 
NA

Change in Plan Assets:
 
 
 
 
 
 
 
Fair value of plan assets—beginning of fiscal year
$
783

 
$
766

 
$
—

 
$
—

Actual return on plan assets
166

 
10

 
—

 
—

Company contribution
84

 
70

 
4

 
4

Benefit payments
(60
)
 
(63
)
 
(4
)
 
(4
)
Fair value of plan assets—end of fiscal year
$
973

 
$
783

 
$
—

 
$
—

Funded status at end of fiscal year
$
(17
)
 
$
(56
)
 
$
(32
)
 
$
(38
)
Recognized in Consolidated Balance Sheets:
 
 
 
 
 
 
 
Non-current asset
$
23

 
$
—

 
$
—

 
$
—

Current liability
(8
)
 
(4
)
 
(4
)
 
(4
)
Non-current liability
(32
)
 
(52
)
 
(28
)
 
(34
)
Funded status at end of fiscal year
$
(17
)
 
$
(56
)
 
$
(32
)
 
$
(38
)
 
 
 
 
 
 
 
 

Amounts recognized in accumulated other comprehensive income before tax: 
 
Pension Benefits
 
Other
Postretirement Benefits
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
 
(in millions)
Net actuarial loss (gain)
$
328

 
$
343

 
$
(3
)
 
$
1

Prior service credit
(33
)
 
(42
)
 
(14
)
 
(17
)
Total
$
295

 
$
301

 
$
(17
)
 
$
(16
)

Amounts from accumulated other comprehensive income to be amortized into net periodic benefit cost in fiscal 2013: 
 
Pension  Benefits
 
Other
Postretirement
 Benefits
 
(in millions)
Actuarial loss
$
28

 
$
—

Prior service credit
(9
)
 
(3
)
Total
$
19

 
$
(3
)

Benefit obligation and fair value of plan assets with obligations in excess of plan assets:
 
Pension Benefits
September 30,
 
2012
 
2011
 
(in millions)
Accumulated benefit obligation in excess of plan assets
 
 
 
Accumulated benefit obligation—end of year
$
(39
)
 
$
(839
)
Fair value of plan assets—end of year
—

 
783

Projected benefit obligation in excess of plan assets
 
 
 
Benefit obligation—end of year
$
(40
)
 
$
(839
)
Fair value of plan assets—end of year
—

 
783


Net periodic pension and other postretirement plan cost:
 
Pension Benefits
 
Other
Postretirement Benefits
Fiscal
 
2012
 
2011
 
2010
 
2012
 
2011
 
2010
 
(in millions)
Service cost
$
38

 
$
41

 
$
45

 
$
—

 
$
—

 
$
—

Interest cost
40

 
38

 
40

 
1

 
1

 
1

Expected return on assets
(55
)
 
(54
)
 
(50
)
 
—

 
—

 
—

Amortization of:
 
 
 
 
 
 
 
 
 
 
 
Prior service credit
(9
)
 
(9
)
 
(9
)
 
(3
)
 
(3
)
 
(3
)
Actuarial loss (gain)
33

 
19

 
16

 
—

 
(1
)
 
(1
)
Net benefit cost
$
47

 
$
35

 
$
42

 
$
(2
)
 
$
(3
)
 
$
(3
)
Settlement loss
3

 
2

 
—

 
—

 
—

 
—

Total net periodic benefit cost
$
50

 
$
37

 
$
42

 
$
(2
)
 
$
(3
)
 
$
(3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Other changes in plan assets and benefit obligations recognized in other comprehensive income: 
 
Pension Benefits
 
Other
Postretirement Benefits
2012
 
2011
 
2012
 
2011
 
(in millions)
Current year actuarial loss (gain)
$
21

 
$
124

 
$
(3
)
 
$
7

Amortization of actuarial (loss) gain
(36
)
 
(21
)
 
—

 
1

Amortization of prior service credit
9

 
9

 
3

 
3

Total (gain) loss recognized in other comprehensive income
$
(6
)
 
$
112

 
$
—

 
$
11

Total recognized in net periodic benefit cost and other comprehensive income
$
44

 
$
149

 
$
(2
)
 
$
8

 
 
 
 
 
 
 
 

Weighted Average Actuarial Assumptions:
 
Fiscal
 
2012
 
2011
 
2010
Discount rate for benefit obligation(1)
 
 
 
 
 
Pension
3.85
%
 
4.70
%
 
5.25
%
Postretirement
2.21
%
 
3.39
%
 
3.45
%
Discount rate for net periodic benefit cost
 
 
 
 
 
Pension
4.70
%
 
5.25
%
 
5.63
%
Postretirement
3.39
%
 
3.45
%
 
4.43
%
Expected long-term rate of return on plan assets(2)
7.50
%
 
7.50
%
 
7.50
%
Rate of increase in compensation levels for:
 
 
 
 
 
Benefit obligation
4.50
%
 
4.50
%
 
4.50
%
Net periodic benefit cost
4.50
%
 
4.50
%
 
5.50
%
(1) 
Based on a “bond duration matching” methodology, which reflects the matching of projected plan liability cash flows to an average of high-quality corporate bond yield curves whose duration matches the projected cash flows.
(2) 
Primarily based on the targeted allocation, and evaluated for reasonableness by considering such factors as: (i) actual return on plan assets; (ii) historical rates of return on various asset classes in the portfolio; (iii) projections of returns on various asset classes; and (iv) current and prospective capital market conditions and economic forecasts.
The assumed annual rate of future increases in health benefits for the other postretirement benefits plan is 7.5% for fiscal 2013. The rate is assumed to decrease to 5% by 2018 and remain at that level thereafter. These trend rates reflect management’s expectations of future rates. Increasing or decreasing the healthcare cost trend by 1% would change the postretirement plan benefit obligation by less than $1 million. 
Pension Plan Assets
Plan assets are managed with a long-term perspective to ensure that there is an adequate level of assets to support benefit payments to participants over the life of the pension plan. Plan assets are managed by external investment managers. Investment manager performance is measured against benchmarks for each asset class on a quarterly basis. An independent consultant assists management with investment manager selections and performance evaluations.
Plan assets are broadly diversified to maintain a prudent level of risk and to provide adequate liquidity for benefit payments. The Company generally evaluates and rebalances the plan assets, as appropriate, to ensure that allocations are consistent with target allocation ranges. The current target allocation for plan assets is as follows: equity securities of 50% to 80%, fixed income securities of 25% to 35% and other, primarily consisting of cash to meet near term expected benefit payments and expenses, of up to 7%. At September 30, 2012, plan asset allocations for the above categories were 65%, 27% and 8% respectively, which were within target allocation ranges with the exception of the other category. Pension plan assets in the other category were temporarily above the Company's target allocation due to an employer contribution made at the end of the plan year. The amount was subsequently reinvested in line with target asset allocations.
The following table sets forth by level, within the fair value hierarchy, the plan’s investments at fair value as of September 30, 2012 and 2011, including the impact of unsettled transactions:
 
 
Fair Value Measurements at September 30
 
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
 
 
(in millions)
Cash equivalents
$
79

 
$
55

 
 
 
 
 
 
 
 
 
$
79

 
$
55

Collective investment funds
 
 
 
 
$
391

 
$
289

 
 
 
 
 
391

 
289

Corporate debt securities
 
 
 
 
115

 
122

 
 
 
 
 
115

 
122

Debt securities of U.S. Treasury and federal agencies
 
 
 
 
121

 
104

 
 
 
 
 
121

 
104

Asset-backed securities
 
 
 
 
 
 
 
 
$
25

 
$
33

 
25

 
33

Equity securities
242

 
180

 
 
 
 
 
 
 
 
 
242

 
180

Total
$
321

 
$
235

 
$
627

 
$
515

 
$
25

 
$
33

 
$
973

 
$
783

Level 1 assets. Cash equivalents (money market funds) and equity securities are classified as Level 1 within the fair value hierarchy, as fair value is based on quoted prices in active markets.
Level 2 assets. Collective investment funds are unregistered investment vehicles that commingle the assets of multiple fiduciary clients, such as pension and other employee benefits plans, to invest in portfolios of stocks, bonds, or other securities. Although the single collective investment fund held by the plan is ultimately invested in the common stocks of companies in the S&P 500 index, its own unit value is not directly observable, and it is therefore classified as Level 2. The fair values of government-sponsored and corporate debt securities are based on quoted prices in active markets for similar assets as provided by third-party pricing vendors. This pricing data is reviewed internally for reasonableness through comparisons with benchmark quotes from independent third-party sources. Based on this review, the valuation is confirmed or revised accordingly.
Level 3 assets. Asset-backed securities are bonds that are backed by various types of assets and primarily consist of mortgage-backed securities. Asset-backed securities are classified as Level 3 due to a lack of observable inputs in measuring fair value.
There were no transfers between Level 1 and Level 2 assets during fiscal 2012 or 2011. A separate roll-forward of Level 3 plan assets measured at fair value is not presented because activities during fiscal 2012 and 2011 were immaterial.
Cash Flows
 
Pension
Benefits
 
Other
Postretirement
Benefits
Actual employer contributions
(in millions)
2012
$
84

 
$
4

2011
70

 
4

Expected employer contributions
 
 
 
2013
$
48

 
4

Expected benefit payments
 
 
 
2013
$
116

 
$
4

2014
117

 
4

2015
107

 
4

2016
108

 
4

2017
100

 
4

2018-2022
419

 
13

Other Benefits
The Company sponsors a defined contribution plan, or 401(K) plan, that covers substantially all of its employees residing in the United States. Personnel costs included $37 million, $34 million and $29 million in fiscal 2012, 2011 and 2010, respectively, for expenses attributable to the Company’s employees under the plan. The Company’s contributions to this plan are funded on a current basis, and the related expenses are recognized in the period that the payroll expenses are incurred.
Settlement Guarantee Management
Settlement Guarantee Management
Note 12—Settlement Guarantee Management
The Company indemnifies clients for settlement losses suffered due to failure of any other customer to honor Visa cards, travelers cheques, deposit access products, point-of-sale check service drivers and other instruments processed in accordance with the operating regulations. This indemnification creates settlement risk for the Company due to the difference in timing between the date of a payment transaction and the date of subsequent settlement. Settlement at risk (or exposure) is estimated based on the sum of the following inputs: (1) average daily volumes during the quarter multiplied by the estimated number of days to settle plus a safety margin; (2) four months of rolling average chargebacks volume; and (3) the total balance for outstanding travelers cheques.
The Company maintains and regularly reviews global settlement risk policies and procedures to manage settlement exposure, which may require clients to post collateral if certain credit standards are not met.
The Company's settlement exposure is limited to the amount of unsettled Visa payment transactions at any point in time. The Company's estimated maximum settlement exposure was approximately $49.3 billion at September 30, 2012, compared to $47.5 billion at September 30, 2011. Of these amounts, $3.5 billion and $3.2 billion at September 30, 2012 and 2011, respectively, were covered by collateral. The total available collateral balances presented below were greater than the settlement exposure covered by customer collateral held due to instances in which the available collateral exceeded the total settlement exposure for certain financial institutions at each date presented.
The Company maintained collateral as follows:
 
September 30,
2012
 
September 30,
2011
 
(in millions)
Cash equivalents
$
823

 
$
931

Pledged securities at market value
307

 
296

Letters of credit
1,084

 
902

Guarantees
2,022

 
1,845

Total
$
4,236

 
$
3,974

 
Cash equivalents collateral is reflected in customer collateral on the consolidated balance sheets as it is held in escrow in the Company's name. All other collateral is excluded from the consolidated balance sheets. Pledged securities are held by third parties in trust for the Company and clients. Letters of credit are provided primarily by client financial institutions to serve as irrevocable guarantees of payment. Guarantees are provided primarily by parent financial institutions to secure the obligations of their subsidiaries. The Company routinely evaluates the financial viability of institutions providing the guarantees.
The fair value of the settlement risk guarantee is estimated using a proprietary model which considers statistically derived loss factors based on historical experience, estimated settlement exposures at period end and a standardized grading process for clients (using, where available, third-party estimates of the probability of customer failure). Historically, the Company experienced minimum losses, which has contributed to an estimated probability-weighted value of the guarantee of approximately $1 million at September 30, 2012 and 2011. These amounts were reflected in accrued liabilities on the consolidated balance sheets.
Derivative Financial Instruments
Derivative Financial Instruments
Note 13—Derivative Financial Instruments
The Company enters into foreign exchange forward derivative contracts to manage the variability in expected future cash flows attributable to changes in foreign exchange rates. At September 30, 2012, all derivative instruments outstanding mature within 12 months or less. The Company does not use foreign exchange forward contracts for speculative or trading purposes.
Cash Flow Hedges
The Company maintains a rolling hedge program with the objective of reducing exchange rate risk from forecasted net exposures of revenues derived from and payments made in foreign currencies during the following 12 months. The aggregate notional amounts of the Company's derivative contracts outstanding in its hedge program were $690 million and $651 million at September 30, 2012 and 2011, respectively. As of September 30, 2012, the Company’s cash flow hedges in an asset position totaled $12 million and were classified in prepaid expenses and other current assets on the consolidated balance sheet, while cash flow hedges in a liability position totaled $11 million and were classified in accrued liabilities on the consolidated balance sheet. See Note 4—Fair Value Measurements and Investments.
To qualify for cash flow hedge accounting treatment, the Company formally documents, at inception of the hedge, all relationships between hedging transactions and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Company also formally assesses whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the cash flows of the hedged items and whether those derivatives may be expected to remain highly effective in future periods.
The Company uses regression analysis to assess effectiveness prospectively and retrospectively. The effectiveness tests are performed on the foreign exchange forward contracts based on changes in the spot rate of the derivative instrument compared to changes in the spot rate of the forecasted hedged transaction. Forward points are excluded for effectiveness testing and measurement purposes. The excluded forward points are reported in earnings. For fiscal 2012, 2011 and 2010, the amounts by which earnings were reduced relating to excluded forward points was $16 million, $20 million and $17 million, respectively.
The effective portion of changes in the fair value of derivatives designated as cash flow hedges is recorded as a component of accumulated other comprehensive income (loss) on the consolidated balance sheets. When the forecasted transaction occurs and is recognized in earnings, the amount in accumulated other comprehensive income (loss) related to that hedge is reclassified to operating revenue or expense. The Company expects to reclassify $19 million pre-tax, to earnings during fiscal 2013.
In the event there is recognized ineffectiveness or the underlying forecasted transaction does not occur within the designated hedge period, or it becomes remote that the forecasted transaction will occur, the related gains and losses on the cash flow hedges are reclassified from accumulated other comprehensive income on the consolidated balance sheet to general and administrative expense on the consolidated statement of operations at that time. The amount of gain or loss recognized in earnings related to ineffectiveness was $1 million or less for each of fiscal 2012, 2011 and 2010.
Derivatives Not Designated as Hedging Instruments
Derivatives not designated as hedging instruments include foreign exchange forward contracts used to manage the impact of fluctuations in foreign currency exchange rates relative to recognized assets and liabilities denominated in non-functional currencies. As these derivatives are not designated in hedging relationships, related gains and losses are recorded directly in earnings as part of general and administrative expense. The Company recorded less than $1 million of gains related to these derivatives during fiscal 2012. At September 30, 2012, these derivative contracts had an aggregate notional amount of $49 million, and a fair value of $1 million, which was classified in prepaid expenses and other current assets on the consolidated balance sheet. See Note 4—Fair Value Measurements and Investments.
The Company's derivative financial instruments are subject to both credit and market risk. The Company monitors the credit-worthiness of the financial institutions that are counterparties to its derivative financial instruments and does not consider the risks of counterparty nonperformance to be significant. The Company mitigates this risk by entering into agreements which require each party to post collateral against its net liability position with the respective counterparty. As of September 30, 2012, the Company has posted and received collateral of $3 million and $4 million, respectively, with counterparties, which are included in prepaid and other current assets, and accrued liabilities, respectively, on the consolidated balance sheet. Notwithstanding the Company’s efforts to manage foreign exchange risk, there can be no absolute assurance that its hedging activities will adequately protect against the risks associated with foreign currency fluctuations. Credit and market risks related to derivative instruments were not considered significant at September 30, 2012.
Enterprise-wide Disclosures and Concentration of Business
Enterprise-wide Disclosures and Concentration of Business
The Company’s long-lived net property, equipment and technology assets are classified by major geographic area as follows:
 
September 30,
2012
 
September 30,
2011
 
(in millions)
U.S.
$
1,539

 
$
1,487

Non-U.S.
95

 
54

Total
$
1,634

 
$
1,541

 
Revenue by geographic market is primarily based on the location of the issuing financial institution. Revenues earned in the U.S. were approximately 55%, 56% and 58% of total operating revenues in fiscal 2012, 2011 and 2010, respectively. No individual country, other than the U.S., generated more than 10% of total operating revenues in these years.
A significant portion of Visa’s operating revenues are concentrated among its largest clients. Loss of business from any of these clients could have an adverse effect on the Company. The Company did not have any customer that generated greater than 10% of its net operating revenues in fiscal 2012, 2011 or 2010.
Stockholders' Equity
Stockholders' Equity
Note 15—Stockholders' Equity
The number of shares of each class and the number of shares of class A common stock on an as-converted basis at September 30, 2012, are as follows:  
 
(in millions except conversion rate)
Shares
Outstanding
 
Conversion
Rate Into
Class A
Common
Stock
 
As-converted Class A Common
Stock (1)
 
 
Class A common stock
535
 
—
 
535
 
Class B common stock
245
 
0.4206
 
103
 
Class C common stock
31
 
1.0000
 
31
 
Total
 
 
 
 
668
(1) 
Figures may not sum due to rounding. As-converted class A common stock count is calculated based on whole numbers.
Reduction in as-converted shares. During fiscal 2012, total as-converted class A common stock was reduced by 22.8 million shares, using $2.4 billion of operating cash on hand. Of the $2.4 billion, $710 million was used to repurchase class A common stock in the open market. In addition, the Company made deposits totaling $1.7 billion of operating cash into the litigation escrow account previously established under the retrospective responsibility plan. These deposits have the same economic effect on earnings per share as repurchasing the Company's class A common stock, because they reduce the class B conversion rate and consequently the as-converted class A common stock share count.
In July 2012, the Company's board of directors authorized a $1 billion share repurchase program to be in effect through July 2013. As of September 30, 2012, the program had remaining authorized funds of $865 million. In October 2012, the Company's board of directors authorized an additional $1.5 billion share repurchase program to be in effect through October 2013. All share repurchase programs authorized prior to July 2012 have been completed.
The following table presents share repurchases in the open market during the following fiscal years:
(in millions, except per share data)
2012
 
2011
Shares repurchased in the open market (1)
6.2

 
26.6

Weighted-average repurchase price per share
$
114.87

 
$
76.08

Total cost
$
710

 
$
2,024

(1) 
All shares repurchased in the open market have been retired and constitute authorized but unissued shares.
Under the terms of the retrospective responsibility plan, when the Company makes a deposit into the litigation escrow account, the shares of class B common stock are subject to dilution through an adjustment to the conversion rate of the shares of class B common stock to shares of class A common stock.
The following table presents as-converted class B common stock after deposits into the litigation escrow account:
 
Fiscal 2012
 
Fiscal 2011
(in millions, except per share and conversion data)
July 2012
 
December 2011
 
March
2011
 
October
2010
Deposits under the retrospective responsibility plan
$
150

 
$
1,565

 
$
400

 
$
800

Effective price per share(1)
$
125.50

 
$
101.75

 
$
73.81

 
$
72.74

Reduction in equivalent number of shares of class A common stock
1.2

 
15.4

 
5.4

 
11.0

Conversion rate of class B common stock to class A common stock after deposits
0.4206

 
0.4254

 
0.4881

 
0.5102

As-converted class B common stock after deposits
103

 
104

 
120

 
125

(1) 
Effective price per share calculated using the volume-weighted average price of the Company's class A common stock over a pricing period in accordance with the Company's amended and restated certificate of incorporation.
Class B Common Stock. The class B common stock is not convertible or transferable until the date on which all of the covered litigation has been finally resolved. This transfer restriction is subject to limited exceptions, including transfers to other holders of class B common stock. After termination of the restrictions, the class B common stock will be convertible into class A common stock if transferred to a person that was not a Visa member or similar person or affiliate of a Visa member or similar person. Upon such transfer, each share of class B common stock will automatically convert into a number of shares of class A common stock based upon the applicable conversion rate in effect at the time of such transfer.
Adjustment of the conversion rate occurs upon: (i) the completion of any follow-on offering of class A common stock completed to increase the size of the litigation escrow account (or any cash deposit by the Company in lieu thereof) resulting in a further corresponding decrease in the conversion rate; or (ii) the final resolution of the covered litigation and the release of funds remaining on deposit in the litigation escrow account to the Company resulting in a corresponding increase in the conversion rate.
Class C Common Stock. As of September 30, 2012, all of the shares of class C common stock have been released from transfer restrictions, and 121 million shares have been converted from class C to class A common stock upon their sale into the public market.
Preferred Stock. Preferred stock may be issued as redeemable or non-redeemable, and it has preference over any class of common stock with respect to the payment of dividends and distribution of the Company’s assets in the event of a liquidation or dissolution. The Company had no shares of preferred stock outstanding during and at the end of fiscal 2012, 2011 and 2010.
Voting Rights. The holders of class A common stock have the right to vote on all matters on which stockholders generally are entitled to vote. All holders of class B and class C common stock have no right to vote on any matters, except for certain defined matters, including any consolidation, merger, combination or any decision to exit the core payments business, in which case the holders of class B and class C common stock are entitled to cast a number of votes equal to the number of shares of class B or class C common stock held multiplied by the applicable conversion rate in effect on the record date.
Dividends Declared. On October 24, 2012, the Company’s board of directors declared a quarterly cash dividend of $0.33 per share of class A common stock (determined in the case of class B and class C common stock on an as-converted basis), which will be paid on December 4, 2012, to all holders of record of the Company’s class A, class B and class C common stock as of November 16, 2012. The Company declared and paid $595 million in dividends in fiscal 2012 at a quarterly rate of $0.22 per share.
Earnings Per Share
Earnings Per Share
Note 16—Earnings Per Share
The following table presents basic and diluted earnings per share for fiscal 2012. 


 
Basic Earnings Per Share
 
 
Diluted Earnings Per Share
 
(in millions, except per share data)
 
Income
Allocation
(A) (1)
 
Weighted
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B) (2)
 
 
Income
Allocation
(A) (1)
 
Weighted
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B) (2)
Class A common stock
$
1,664

  
524

 
$
3.17

 
 
$
2,144

 
678

(3) 
$
3.16

Class B common stock
343

 
245

 
1.40

 
 
341

 
245

 
1.39

Class C common stock
130

  
41

 
3.17

 
 
129

 
41

 
3.16

Participating securities(4)
7

  
Not presented

 
Not presented

 
 
7

 
Not presented

 
Not presented

Net income attributable to Visa Inc.
$
2,144

  
 
 
 
 
 
 
 
 
 
 
The following table presents basic and diluted earnings per share for fiscal 2011. 
 
Basic Earnings Per Share
 
 
Diluted Earnings Per Share
 
(in millions, except per share data)
 
Income
Allocation
(A) (1)
 
Weighted
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B) (2)
 
 
Income
Allocation
(A) (1)
 
Weighted
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B) (2)
Class A common stock
$
2,638

 
509
 
$
5.18

 
 
$
3,650

 
707
(3) 
$
5.16

Class B common stock
636

 
245
 
2.59

 
 
633

 
245
 
2.58

Class C common stock
364

 
70
 
5.18

 
 
363

 
70
 
5.16

Participating securities(4)
12

  
Not presented
 
Not presented

 
 
12

  
Not presented
 
Not presented

Net income attributable to Visa Inc.
$
3,650

  
 
 
 
 
 
 
 
 
 
 
The following table presents basic and diluted earnings per share for fiscal 2010. 
 
Basic Earnings Per Share
 
 
Diluted Earnings Per Share
 
(in millions, except per share data)
 
Income
Allocation
(A) (1)
 
Weighted
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B) (2)
 
 
Income
Allocation
(A) (1)
 
Weighted
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B) (2)
Class A common stock
$
1,940

  
482
 
$
4.03

 
 
$
2,966

  
739
(3) 
$
4.01

Class B common stock
566

 
245
 
2.31

 
 
565

 
245
 
2.30

Class C common stock
451

  
112
 
4.03

 
 
449

  
112
 
4.01

Participating securities(4)
9

  
Not presented
 
Not presented

 
 
9

  
Not presented
 
Not presented

Net income attributable to Visa Inc.
$
2,966

  
 
 
 
 
 
 
 
 
 
 
(1) 
Net income attributable to Visa Inc. is allocated based on proportional ownership on an as-converted basis. The weighted average numbers of shares of as-converted class B common stock used in the income allocation were 108 million, 123 million and 141 million for fiscal 2012, 2011 and 2010, respectively.
(2) 
Earnings per share calculated based on whole numbers, not rounded numbers.
(3) 
Weighted-average dilutive shares outstanding is calculated on an as-converted basis, and includes incremental common stock equivalents, as calculated under the treasury stock method. The computation includes 3 million common stock equivalents for fiscal 2012 and 2011, and 2 million common stock equivalents for fiscal 2010, respectively, because their effect would have been dilutive, and excludes less than 1 million, 2 million and 3 million common stock equivalents for fiscal 2012, 2011 and 2010, respectively, because their effect would have been anti-dilutive.
(4) 
Participating securities are unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents, such as the Company's restricted stock awards, restricted stock units and earned performance-based shares.
Share-based Compensation
Share-based Compensation
Note 17—Share-based Compensation

The Company’s 2007 Equity Incentive Compensation Plan, or the EIP, authorizes the compensation committee of the board of directors to grant non-qualified stock options ("options"), restricted stock awards ("RSAs"), restricted stock units ("RSUs") and performance-based shares to its employees and non-employee directors, for up to 59 million shares of class A common stock. Shares available for award may be either authorized and unissued or previously issued shares subsequently acquired by the Company. The EIP will continue to be in effect until all of the common stock available under the EIP is delivered and all restrictions on those shares have lapsed, unless the EIP is terminated earlier by the Company’s board of directors. No awards may be granted under the plan on or after 10 years from its effective date.
Share-based compensation cost is recorded net of estimated forfeitures on a straight-line basis for awards with service conditions only, and on a graded-vesting basis for awards with service, performance and market conditions. The Company’s estimated forfeiture rate is based on an evaluation of historical, actual and trended forfeiture data. For fiscal 2012, 2011, and 2010, the Company recorded share-based compensation cost of $147 million, $154 million and $135 million, respectively, in personnel on its consolidated statements of operations. The amount of capitalized share-based compensation cost was immaterial during fiscal 2012, 2011, and 2010.
Options
Options issued under the EIP expire 10 years from the date of grant and vest ratably over three years from the date of grant, subject to earlier vesting in full under certain conditions.
During fiscal 2012, 2011 and 2010, the fair value of each stock option was estimated on the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:
 
 
2012
 
2011
 
2010 (1)
Expected term (in years)(2)
 
6.02

 
5.16

 
3.46

Risk-free rate of return(3)
 
1.2
%
 
1.2
%
 
1.4
%
Expected volatility(4)
 
34.9
%
 
33.4
%
 
36.4
%
Expected dividend yield(5)
 
0.9
%
 
0.8
%
 
0.7
%
Fair value per option granted
 
$
29.65

 
$
27.50

 
$
29.46

(1) 
Includes the impact of 1.6 million replacement awards issued to former CyberSource employees as part of the CyberSource acquisition in July 2010. These awards have a weighted-average exercise price of $47.34 per share and vest over a period of less than three years from the replacement grant date.
(2) 
Based on a set of peer companies that management believes is generally comparable to Visa.
(3) 
Based upon the zero coupon U.S. treasury bond rate over the expected term of the awards.
(4) 
Based on the average of the Company’s implied and historical volatility. As the Company’s publicly traded stock history is relatively short, historical volatility relies in part on the historical volatility of a group of peer companies that management believes is generally comparable to Visa. The expected volatilities ranged from 31% to 35% in fiscal 2012.
(5) 
Based on the Company’s annual dividend rate on the date of grant.
The following table summarizes the Company’s option activity for fiscal 2012:
 
Options
 
Weighted-
Average
Exercise Price
Per Share
 
Weighted-
Average
Remaining
Contractual
Term
(in years)
 
Aggregate
Intrinsic
Value (1)
(in millions)
Outstanding at October 1, 2011
8,554,389

 
$
52.81

 
 
 
 
Granted
441,191

 
93.22

 
 
 
 
Forfeited
(140,590
)
 
72.90

 
 
 
 
Exercised
(3,669,315
)
 
47.50

 
 
 
 
Outstanding at September 30, 2012
5,185,675

 
59.46

 
6.1
 
$388
Options exercisable at September 30, 2012
3,746,662

 
51.98

 
5.6
 
$308
Options exercisable and expected to be vested at September 30, 2012(2)
5,039,896

 
$
58.92

 
6.1
 
$380
(1) 
Calculated using the closing stock price on the last trading day of fiscal 2012 of $134.28, less the option exercise price, multiplied by the number of instruments.
(2) 
Applies a forfeiture rate to unvested options outstanding at September 30, 2012 to estimate the number expected to vest in the future.
For the options exercised during fiscal 2012, 2011 and 2010, the total intrinsic value was $247 million, $77 million and $42 million, respectively, and the tax benefit realized was $86 million, $28 million and $15 million, respectively. As of September 30, 2012, there was $17 million of total unrecognized compensation cost related to unvested options, which is expected to be recognized over a weighted-average period of approximately 0.9 years.
Restricted Stock Awards and Restricted Stock Units
RSAs and RSUs issued under the EIP primarily vest ratably over three years from the date of grant, subject to earlier vesting in full under certain conditions.
Upon vesting, the RSAs are settled in class A common stock on a one-for-one basis. During the vesting period, RSA award recipients are eligible to receive dividends and participate in the same voting rights as those granted to the holders of the underlying class A common stock. Upon vesting, RSUs can be settled in class A common stock on a one-for-one basis or in cash, or a combination thereof, at the Company’s option. The Company does not currently intend to settle any RSUs in cash. During the vesting period, RSU award recipients are eligible to receive dividend equivalents but do not participate in the voting rights granted to the holders of the underlying class A common stock.
The fair value and compensation cost before estimated forfeitures for RSAs and RSUs is calculated using the closing price of class A common stock on the date of grant. The weighted-average grant-date fair value of RSAs granted during fiscal 2012, 2011 and 2010 was $96.39, $79.80 and $79.58, respectively. The weighted-average grant-date fair value of RSUs granted during fiscal 2012, 2011 and 2010 was $96.97, $79.97 and $79.59, respectively. The total grant-date fair value of RSAs and RSUs vested during fiscal 2012, 2011 and 2010 was $81 million, $55 million and $32 million, respectively.
The following table summarizes the Company's RSA and RSU activity for fiscal 2012:
 
Restricted Stock
 
Weighted-
Average
Grant Date
Fair Value
 
Weighted-
Average
Remaining
Contractual
Term
(in years)
 
Aggregate
Intrinsic
Value (1)
(in millions)
 
Awards
 
Units
 
RSA
 
RSU
 
RSA
 
RSU
 
RSA
 
RSU
Outstanding at October 1, 2011
1,785,975

 
467,803

 
$
75.28

 
$
76.65

 
 
 
 
 
 
 
 
Granted
974,233

 
432,763

 
96.39

 
96.97

 
 
 
 
 
 
 
 
Vested
(911,877
)
 
(224,401
)
 
71.03

 
73.24

 
 
 
 
 
 
 
 
Forfeited
(111,342
)
 
(38,520
)
 
84.44

 
84.49

 
 
 
 
 
 
 
 
Outstanding at September 30, 2012
1,736,989

 
637,645

 
$
88.77

 
$
91.17

 
1.6
 
1.4
 
$233
 
$86
(1) 
Calculated by multiplying the closing stock price on the last trading day of fiscal 2012 of $134.28 by the number of instruments.
At September 30, 2012, there was $89 million and $30 million of total unrecognized compensation cost related to unvested RSAs and RSUs, respectively.
Performance-based Shares
The following table summarizes the maximum number of performance-based shares which could be earned and related activity for fiscal 2012:
 
Shares
 
Weighted-
Average
Grant Date
Fair Value
 
Weighted-
Average
Remaining
Contractual
Term
(in years)
 
Aggregate
Intrinsic
Value (1)
(in millions)
Outstanding at October 1, 2011
632,786

 
$
80.69

 
 
 
 
Granted
132,227

 
97.84

 
 
 
 
Vested and earned
(213,801
)
 
70.41

 
 
 
 
Unearned
(6,977
)
 
88.06

 
 
 
 
Forfeited
(18,008
)
 
89.75

 
 
 
 
Outstanding at September 30, 2012
526,227

 
$
88.56

 
0.9
 
$71
(1) 
Calculated by multiplying the closing stock price on the last trading day of fiscal 2012 of $134.28 by the number of instruments.
For the Company's performance-based shares, in addition to service conditions, the ultimate number of shares to be earned depends on the achievement of both performance and market conditions. The performance condition is based on either (1) the Company's earnings per share target or; (2) the Company's achievement of specified cumulative net income performance targets. The market condition is based on the Company's total shareholder return ranked against that of other companies that are included in the Standard & Poor's 500 Index. The fair value of the performance-based shares, incorporating the market condition, is estimated on the grant date using a Monte Carlo simulation model. The grant-date fair value of performance-based shares in fiscal 2012, 2011 and 2010 was $97.84, $85.05 and $88.06 per share, respectively. Earned performance shares granted in fiscal 2012 vest approximately three years from the initial grant date. Earned performance shares granted in fiscal 2011 and 2010 vest in two equal installments approximately two and three years from their respective grant dates. All performance awards are subject to earlier vesting in full under certain conditions.
Compensation cost for performance-based shares is initially estimated based on target performance. It is recorded net of estimated forfeitures and adjusted as appropriate throughout the performance period. At September 30, 2012, there was $8 million of total unrecognized compensation cost related to unvested performance-based shares, which is expected to be recognized over a weighted-average period of approximately 0.9 years.
Commitments and Contingencies
Commitments and Contingencies
Note 18—Commitments and Contingencies
Commitments. The Company leases certain premises and equipment throughout the world with varying expiration dates. The Company incurred total rent expense of $89 million, $76 million and $59 million in fiscal 2012, 2011 and 2010, respectively. Future minimum payments on leases and marketing and sponsorship agreements per fiscal year, at September 30, 2012, are as follows:
(in millions)
2013
 
2014
 
2015
 
2016
 
2017
 
Thereafter
 
Total
Operating leases
$
95

 
$
75

 
$
48

 
$
35

 
$
28

 
$
64

 
$
345

Capital leases
6

 
—

 
—

 
—

 
—

 
—

 
6

Marketing and sponsorships
120

 
120

 
117

 
61

 
54

 
231

 
703

Total
$
221

 
$
195

 
$
165

 
$
96

 
$
82

 
$
295

 
$
1,054

Select sponsorship agreements require the Company to spend certain minimum amounts for advertising and marketing promotion over the life of the contract. For commitments where the individual years of spend are not specified in the contract, the Company has estimated the timing of when these amounts will be spent. In addition to the fixed payments stated above, select sponsorship agreements require the Company to undertake marketing, promotional or other activities up to stated monetary values to support events which the Company is sponsoring. The stated monetary value of these activities typically represents the value in the marketplace, which may be significantly in excess of the actual costs incurred by the Company.
Client Incentives. The Company has agreements with select clients and other business partners designed to build payments volume, increase acceptance and win merchant preference to route transactions over our network. These agreements, with original terms ranging from one to thirteen years, can provide card issuance and/or conversion support, volume / growth targets and marketing and program support based on specific performance requirements. These agreements are designed to encourage client business and to increase overall Visa-branded payment and transaction volume, thereby reducing per unit transaction processing costs and increasing brand awareness for all Visa clients.
Payments made that qualify for capitalization and obligations incurred under these programs are reflected on the balance sheet. Client Incentives are recognized primarily as a reduction to revenue in the period the related volumes and transactions occur, based on management's estimate of the customer's performance in accordance with the terms of the incentive agreement. The agreements may or may not limit the amount of customer incentive payments.
The table below sets forth the expected future reduction of revenue for client incentive agreements in effect at September 30, 2012: 
(in millions)
2013
 
2014
 
2015
 
2016
 
2017
 
Thereafter
 
Total
Client incentives
$
2,277

 
$
1,947

 
$
1,590

 
$
1,189

 
$
675

 
$
523

 
$
8,201


The amount of client incentives recorded as a reduction of revenue in future periods under the Company's incentive arrangements, will be greater or less than the estimates above due to changes in performance expectations, actual client performance, amendments to existing contracts or the execution of new contracts. Based on these agreements, increases in incentive payments are generally driven by increased payment and transaction volume, and as a result, in the event incentive payments exceed the above estimates, such payments are not expected to have a material effect on the Company's financial condition, results of operations or cash flows.
Related Parties
Related Parties
Note 19—Related Parties
Visa considers an entity to be a related party for purposes of this disclosure if that entity owns more than 10% of Visa’s total voting common stock at the end of the fiscal year or if an officer or employee of that entity also serves on the Company's board of directors. The Company considers an investee to be a related party if the Company’s (i) ownership interest in the investee is greater than or equal to 10% or (ii) if the investment is accounted for under the equity method of accounting. There were no material operating expenses incurred during fiscal 2012, 2011 and 2010, or material amounts due to or from related parties at the end of fiscal 2012 and 2011.
Ownership. At September 30, 2012 and 2011, no entity owned more than 10% of the Company’s total voting common stock.
Board representation. In January 2011, the Company's board made the decision to reduce its overall size. Subsequently, the non-executive board members have been comprised exclusively of independent directors. The Company generated total operating revenues of approximately $172 million and $597 million from clients represented on its board of directors during fiscal 2011 and 2010, respectively.
Investees. The Company generated total operating revenues of $19 million, $28 million and $27 million, and received dividend income of $1 million, $1 million and $2 million from related party investees during fiscal 2012, 2011 and 2010, respectively.
Income Taxes
Income Taxes
Note 20—Income Taxes
The Company’s income before taxes by fiscal year consisted of the following:
 
2012
 
2011
 
2010
 
(in millions)
U.S.
$
1,030

 
$
4,650

 
$
3,973

Non-U.S.
1,177

 
1,006

 
665

Total income before taxes and non-controlling interest
$
2,207

 
$
5,656

 
$
4,638


U.S. income before taxes included $1.6 billion, $1.3 billion and $1.1 billion from non-U.S. clients for fiscal 2012, 2011 and 2010, respectively.
Income tax provision by fiscal year consisted of the following:
 
2012
 
2011
 
2010
 
(in millions)
Current:
 
 
 
 
 
U.S. federal
$
1,376

 
$
1,365

 
$
1,089

State and local
165

 
311

 
260

Non-U.S.
214

 
168

 
76

Total current taxes
1,755

 
1,844

 
1,425

Deferred:
 
 
 
 
 
U.S. federal
(1,276
)
 
160

 
209

State and local
(415
)
 
(2
)
 
35

Non-U.S.
1

 
8

 
5

Total deferred taxes
(1,690
)
 
166

 
249

Total income tax provision
$
65

 
$
2,010

 
$
1,674


The tax effect of temporary differences that give rise to significant portions of deferred tax assets and liabilities at September 30, 2012 and 2011, are presented below:
 
2012
 
2011
 
(in millions)
Deferred Tax Assets
 
 
 
Accrued compensation and benefits
$
103

 
$
96

Comprehensive income
102

 
104

Investments in joint ventures
11

 
15

Accrued litigation obligation
1,654

 
128

Client incentives
227

 
184

Net operating loss carryforward
33

 
38

Tax credits
23

 
26

Federal benefit of state taxes
90

 
300

Federal benefit of foreign taxes
16

 
7

Other
92

 
76

Valuation allowance
(13
)
 
—

Deferred tax assets
2,338

 
974

Deferred Tax Liabilities
 
 
 
Property, equipment and technology, net
(288
)
 
(266
)
Intangible assets
(4,027
)
 
(4,374
)
Foreign taxes
(44
)
 
(40
)
Other
(10
)
 
(10
)
Deferred tax liabilities
(4,369
)
 
(4,690
)
Net deferred tax liabilities
$
(2,031
)
 
$
(3,716
)

Total net deferred tax assets and liabilities are included in the Company’s consolidated balance sheets as follows:
 
September 30,
2012
 
September 30,
2011
 
(in millions)
Current deferred tax assets
$
2,027

 
$
489

Non-current deferred tax liabilities
(4,058
)
 
(4,205
)
Net deferred tax liabilities
$
(2,031
)
 
$
(3,716
)

The increase in the deferred tax asset for accrued litigation obligation is primarily due to the covered litigation provision in fiscal 2012. The decrease in the Company's deferred tax liabilities is primarily due to the one-time, non-cash remeasurement as a result of changes in California state apportionment rules in fiscal 2012.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. The fiscal 2012 valuation allowance relates primarily to foreign net operating losses from subsidiaries acquired in recent years. 
As of September 30, 2012, the Company had $20 million federal, $116 million state and $70 million foreign net operating loss carryforwards. The federal and state net operating loss carryforwards will expire in fiscal 2021 through 2031. The foreign net operating loss may be carried forward indefinitely. Internal Revenue Code Section 382 imposes substantial restrictions on the utilization of net operating losses and tax credits in the event of a corporation’s ownership change, as defined in the Internal Revenue Code. Although the Company’s ability to utilize the U.S. net operating loss carryforwards was limited in fiscal 2012, the Company expects to fully utilize the net operating loss carryforwards in future years.
As of September 30, 2012, the Company also had federal and state research and development tax credit carryforwards of $4 million and $19 million, respectively. The federal carryforwards will expire in fiscal 2021 through 2029. The state carryforwards may be carried forward indefinitely. The Company also has federal alternative minimum tax credits of approximately $1 million, which do not expire. The Company expects to realize the benefit of the credit carryforwards in future years.
The income tax provision differs from the amount of income tax determined by applying the applicable U.S. federal statutory rate of 35% to pretax income, as a result of the following:
 
 
For the Years Ended September 30
 
2012
 
2011
 
2010
 
Dollars
 
Percent
 
Dollars
 
Percent
 
Dollars
 
Percent
 
(in millions)
U.S. federal income tax at statutory rate
$
772

 
35
 %
 
$
1,980

 
35
 %
 
$
1,623

 
35
 %
State income taxes, net of federal benefit
36

 
2
 %
 
203

 
4
 %
 
177

 
4
 %
Non-U.S. tax effect, net of federal benefit
(257
)
 
(12
)%
 
(150
)
 
(2
)%
 
(124
)
 
(2
)%
Reversal of tax reserves related to the deductibility of covered litigation expense
(299
)
 
(14
)%
 
—

 
—
 %
 
—

 
—
 %
Remeasurement of deferred taxes due to:
 
 
 
 
 
 
 
 
 
 
 
California state apportionment rule changes
(208
)
 
(9
)%
 
—

 
—
 %
 
—

 
—
 %
Other state apportionment changes
11

 
1
 %
 
(3
)
 
—
 %
 
15

 
—
 %
Revaluation of Visa Europe put option
—

 
—
 %
 
(43
)
 
(1
)%
 
(28
)
 
(1
)%
Other, net
10

 
—
 %
 
23

 
—
 %
 
11

 
—
 %
Income tax provision
$
65

 
3
 %
 
$
2,010

 
36
 %
 
$
1,674

 
36
 %

The effective income tax rate in fiscal 2012 was lower than that in fiscal 2011 and 2010 primarily due to:
▪
the fiscal 2012 reversal of previously recorded tax reserves associated with uncertainties related to the deductibility of covered litigation expense;
▪
a decrease in the overall state tax rate due to changes in the California apportionment rules and the associated one-time, non-cash remeasurement of existing net deferred tax liabilities in fiscal 2012;
▪
a one-time benefit recognized upon initial recognition of foreign tax credits in fiscal 2012;
▪
the effect of applying the foregoing adjustments to a pre-tax income that was reduced by a $4.1 billion covered litigation provision; and
▪
the absence of nontaxable revaluations of the Visa Europe put option in fiscal 2012.
Income taxes receivable of $179 million and $112 million are included in prepaid and other current assets at September 30, 2012 and 2011, respectively. See Note 6—Prepaid Expenses and Other Assets. At September 30, 2012 and 2011, income taxes payable of $58 million and $63 million, respectively, are included in accrued income taxes as part of accrued liabilities, and accrued income taxes of $171 million and $468 million, respectively, are included in other long-term liabilities. See Note 9—Accrued and Other Liabilities.
Cumulative undistributed earnings of the Company’s international subsidiaries that are intended to be reinvested indefinitely outside the U.S. amounted to $2.6 billion at September 30, 2012. The amount of income taxes that would have resulted had such earnings been repatriated is not practicably determinable.
The Company’s largest operating hub outside the U.S. is located in Singapore. It operates under a tax incentive agreement which is effective through September 30, 2014, and may be extended through September 30, 2023, if certain additional requirements are satisfied. The tax incentive agreement is conditional upon certain employment and investment thresholds being met by the Company. The tax incentive agreement decreased Singapore tax by $130 million, $111 million and $93 million, and the benefit of the tax incentive agreement on diluted earnings per share was $0.19, $0.16 and $0.13 in fiscal 2012, 2011 and 2010, respectively.
In accordance with ASC 740, the Company is required to inventory, evaluate, and measure all uncertain tax positions taken or to be taken on tax returns, and to record liabilities for the amount of such positions that may not be sustained, or may only partially be sustained, upon examination by the relevant taxing authorities.
At September 30, 2012 and 2011, the Company’s total gross unrecognized tax benefits were $679 million and $850 million, respectively, exclusive of interest and penalties described below. Included in the $679 million and $850 million are $537 million and $696 million of unrecognized tax benefits, respectively, that if recognized, would reduce the effective tax rate in a future period.
A reconciliation of beginning and ending unrecognized tax benefits by fiscal year is as follows: 
 
2012
 
2011
 
(in millions)
Beginning balance at October 1
$
850

 
$
545

Increases of unrecognized tax benefits related to prior years
186

 
206

Decreases of unrecognized tax benefits related to prior years
(445
)
 
(52
)
Increases of unrecognized tax benefits related to current year
89

 
158

Reductions related to lapsing statute of limitations
(1
)
 
(7
)
Ending balance at September 30
$
679

 
$
850

It is the Company’s policy to account for interest expense and penalties related to uncertain tax positions as interest expense, and general and administrative expense, respectively, in its consolidated statements of operations. In fiscal 2012, the Company reversed $45 million of interest expense primarily associated with uncertainties related to the deductibility of covered litigation expense. In fiscal 2011 and 2010, the Company recognized $7 million and $37 million of interest expense, respectively, related to uncertain tax positions. In fiscal 2012 and 2011, the Company reversed $1 million and $2 million of penalties, respectively. In fiscal 2010, the Company recognized $5 million of penalties. At September 30, 2012 and 2011, the Company had accrued interest of $20 million and $65 million, respectively, and accrued penalties of $7 million and $8 million, respectively, related to uncertain tax positions in its other long-term liabilities. 
In September 2012, the IRS completed the examination of the Company's fiscal 2006, 2007 and 2008 U.S. federal income tax returns with no significant adjustments. The statute of limitations for these years is expected to expire in June of 2013. Upon the successful completion of this examination in fiscal 2012, the Company reversed $425 million of unrecognized tax benefits, primarily related to the deductibility of covered litigation.
The IRS will begin the examination of the Company's fiscal 2009, 2010 and 2011 tax returns in fiscal 2013. The Company's California fiscal 2006, 2007 and 2008 tax returns are currently under examination. Except for certain outstanding refund claims, the federal and California statutes of limitations have expired for fiscal years prior to fiscal 2006. The Company's fiscal 2003 to 2009 Canadian income tax returns are currently under examination by the Canada Revenue Agency. The Company is also subject to examinations by various state and foreign tax authorities. All material state and foreign tax matters have been concluded for years through fiscal 2002. The timings and outcomes of the final resolutions of the federal, state and foreign tax examinations and refund claims are uncertain. As such, it is not reasonably possible to estimate the impacts that the final outcomes could have on the Company's unrecognized tax benefits in the next 12 months.
Legal Matters
Legal Matters and Contingencies [Text Block]
Note 21—Legal Matters
The Company is party to various legal and regulatory proceedings. Some of these proceedings involve complex claims that are subject to substantial uncertainties and unascertainable damages. Accordingly, except as disclosed, the Company has not established reserves or ranges of possible loss related to these proceedings, as at this time in the proceedings, the matters do not relate to a probable loss and/or amounts are not reasonably estimable. Although the Company believes that it has strong defenses for the litigation and regulatory proceedings described below, it could in the future incur judgments or fines or enter into settlements of claims that could have a material adverse effect on the Company’s results of operations, financial position or cash flows. From time to time, the Company may engage in settlement discussions or mediations with respect to one or more of its outstanding litigation matters, either on its own behalf or collectively with other parties.
The Company recorded litigation provisions of $4.1 billion, $7 million and $(45) million in fiscal 2012, 2011 and 2010, respectively. The credit to the provision in fiscal 2010 was primarily the result of a $41 million pre-tax gain recognized related to the prepayment of the remaining obligations under the settlement agreement in the Retailers' litigation (discussed in Other Litigation below). The remaining credit balance was due to the release of accruals for certain legal matters settled during fiscal 2010. The litigation accrual is an estimate and is based on management’s understanding of its litigation profile, the specifics of each case, advice of counsel to the extent appropriate and management’s best estimate of incurred loss at the balance sheet date.
The following table summarizes the activity related to accrued litigation for both covered and other non-covered litigation for the years ended September 30, 2012 and 2011:
 
2012
 
2011
 
(in millions)
Balance at October 1
$
425

 
$
697

Provision for unsettled legal matters
4,100

 
—

Provision for settled legal matters
—

 
7

Reclassification of settled matters (1)
—

 
12

Interest accretion on settled matters
1

 
11

Payments on settled matters
(140
)
 
(302
)
Balance at September 30
$
4,386

 
$
425

(1) 
Reclassification of amount previously recorded in accrued liabilities.
Covered Litigation
Visa Inc., Visa U.S.A. and Visa International are parties to certain legal proceedings that are covered by the retrospective responsibility plan, which the Company refers to as the covered litigation. See Note 3—Retrospective Responsibility Plan. An accrual for the covered litigation and a charge to the litigation provision are recorded when loss is deemed to be probable and reasonably estimable. In making this determination, the Company evaluates available information, including but not limited to actions taken by the litigation committee. The Company recorded an additional accrual of $4.1 billion for the covered litigation during fiscal 2012, which increased its total reserve for the covered litigation from $285 million to $4.4 billion. The current uncommitted balance of the covered litigation escrow account of $4.4 billion was deposited by the Company primarily with a view toward resolving the Interchange Litigation. The total accrual related to the covered litigation could be either higher or lower than the escrow account balance.
The Discover Litigation. On October 4, 2004, Discover Financial Services, Inc. filed a complaint against Visa U.S.A., Visa International and MasterCard International Incorporated (MasterCard). The complaint was filed in the U.S. District Court for the Southern District of New York and was designated as a related case to a lawsuit brought by the U.S. Department of Justice (DOJ) in 1998. The complaint alleged, among other things, that the implementation and enforcement of Visa's bylaw 2.10(e) and MasterCard's Competitive Programs Policy, or CPP, which prohibited their respective members from issuing American Express or Discover cards violated Sections 1 and 2 of the Sherman Act and California's Unfair Competition Law, and sought money damages (subject to trebling) and attorneys' fees and costs.
On October 13, 2008, Visa, MasterCard and Discover reached an agreement in principle to settle the litigation. The parties executed a final settlement agreement on October 27, 2008 that became effective on November 4, 2008 upon approval by holders of Visa's class B common stock. Visa's net share of the settlement totaled $1.8 billion, of which $1.74 billion was paid over four quarters from the escrow account established by the retrospective responsibility plan. Visa Inc. also paid $80 million toward Visa's share in connection with releases obtained from MasterCard with respect to certain potential claims. Visa Inc. also paid an additional $65 million, which was refunded by Morgan Stanley, under a separate agreement related to the settlement. Visa's settlement obligations were fully satisfied with the September 2009 payment to Discover.
The American Express Litigation. On November 15, 2004, American Express filed a complaint against Visa U.S.A., Visa International, MasterCard and several Visa U.S.A. and Visa International member financial institutions in the U.S. District Court for the Southern District of New York. The complaint alleged that the implementation and enforcement of Visa U.S.A.'s bylaw 2.10(e) and MasterCard's CPP violated Sections 1 and 2 of the Sherman Act, and sought money damages (subject to trebling) and attorneys' fees and costs.
Visa Inc., Visa U.S.A. and Visa International entered into a settlement agreement with American Express that became effective on November 9, 2007. Under the settlement agreement, American Express received payments of $2.25 billion, including $2.07 billion from Visa Inc. and $185 million from five co-defendant banks. An initial payment of $1.13 billion was made on March 31, 2008, including $945 million funded through the litigation escrow account established under the retrospective responsibility plan and $185 million from the five co-defendant banks. Beginning April 2008, Visa Inc. paid American Express an additional amount of $70 million each quarter for 16 quarters, for a total of $1.12 billion. Visa's settlement obligations were fully satisfied with the January 2012 payment to American Express. The quarterly settlement payments were also covered by the retrospective responsibility plan. The total settlement was recorded in fiscal 2007 at a discounted value of $1.9 billion using a rate of 4.72% over the payment term.
The Attridge Litigation. On December 8, 2004, a complaint was filed in California state court on behalf of an alleged class of consumers asserting claims against Visa U.S.A., Visa International and MasterCard under California's Cartwright Act and Unfair Competition Law. The claims in this action, Attridge v. Visa U.S.A. Inc., et al., seek to piggyback on the portion of the DOJ litigation in which the U.S. District Court for the Southern District of New York found that Visa's bylaw 2.10(e) and MasterCard's CPP constitute unlawful restraints of trade under the federal antitrust laws. On May 19, 2006, the court entered an order dismissing plaintiff's Cartwright Act claims with prejudice but allowing the plaintiff to proceed with his Unfair Competition Law claims, which seek restitution, injunctive relief, and attorneys' fees and costs. On December 14, 2007, the plaintiff amended his complaint to add Visa Inc. as a defendant. No new claims were added to the complaint.
On July 1, 2009, the court denied in part the Defendants' Motion for Summary Judgment or Summary Adjudication, but ordered the parties to submit affidavits as to whether further discovery should be conducted prior to the court rendering judgment on the Motion for Summary Adjudication. On August 3, 2009, the court ruled the Motion submitted without any such further discovery.
In the separate “Indirect Purchaser” Credit/Debit Card Tying Cases, also pending in California state court, Visa entered into a settlement agreement on September 14, 2009 which potentially could have had the effect of releasing the claims asserted in the Attridge case, subject to the ruling of the Attridge court. On September 24, 2009, the Attridge court deferred its decision on the Motion for Summary Adjudication pending court approval of the settlement in the Credit/Debit Card Tying Cases. On August 23, 2010, final approval of the Credit/Debit Card Tying Cases settlement was granted. The plaintiff in Attridge and others appealed the final approval order. On February 15, 2011, the court ordered that the Attridge case be stayed until 30 days following the final resolution of the appeals in the Credit/Debit Card Tying Cases. On January 9, 2012, the appeals court reversed the approval of the Credit/Debit Card Tying Cases settlement, and the case was remanded to the trial court for consideration of the fairness and adequacy of the settlement in light of the inclusion of the Attridge claims in the release. Attridge filed a motion to disqualify the trial judge in the Credit/Debit Card Tying Cases, which was granted. On June 4, 2012, the Credit/Debit Card Tying Cases were reassigned to the Honorable John E. Munter, the same judge in the Attridge case. On July 17, 2012, the Attridge case was stayed until January 16, 2013.
The Interchange Litigation
Multidistrict Litigation Proceedings (MDL). Beginning in May 2005, approximately 55 complaints, all but 13 of which were styled as class actions, have been filed in U.S. federal district courts on behalf of merchants against Visa U.S.A. and/or MasterCard, and in some cases, certain Visa member financial institutions. Visa International was also named as a defendant in more than 30 of these complaints. The cases allege, among other things, that Visa's and MasterCard's purported setting of interchange reimbursement fees, their “no surcharge” rules, and alleged tying and bundling of transaction fees violate federal antitrust laws. On October 19, 2005, the Judicial Panel on Multidistrict Litigation issued an order transferring these cases to the U.S. District Court for the Eastern District of New York for coordination of pre-trial proceedings (MDL 1720). On April 24, 2006, the group of purported class plaintiffs filed a First Amended Class Action Complaint. Taken together, the claims in the First Amended Class Action Complaint and in the 13 complaints brought on behalf of individual merchants are generally brought under Sections 1 and 2 of the Sherman Act. In addition, some of these complaints contain certain state unfair competition law claims. These interchange-related cases seek money damages (alleged in the consolidated class action complaint to range in the tens of billions of dollars), subject to trebling, as well as attorneys' fees and injunctive relief.
As part of the retrospective responsibility plan, Visa U.S.A. and Visa International entered into an interchange judgment sharing agreement with certain member financial institutions of Visa U.S.A. on July 1, 2007.
On January 8, 2008, the district court adopted the recommendation of the Magistrate Judge and granted defendants' motion to dismiss the class plaintiffs' claims for damages incurred prior to January 1, 2004.
On January 29, 2009, class plaintiffs filed a Second Consolidated Amended Class Action Complaint. Among other things, this complaint: (i) added new claims for damages and injunctive relief against Visa and the bank defendants regarding interchange reimbursement fees for Visa PIN-debit cards; (ii) added new claims for damages and injunctive relief against Visa and the bank defendants since the time of Visa's IPO regarding interchange reimbursement fees for Visa's credit, offline debit, and PIN-debit cards; (iii) eliminated claims for damages relating to the so-called “no-surcharge” rule and “anti-steering” rules; (iv) eliminated claims for damages based on the alleged tie of network processing services and payment guarantee services to the payment card system services; and (v) added Visa Inc. as a defendant.
In addition, class plaintiffs filed a Second Supplemental Class Action Complaint (the “Supplemental Complaint”) against Visa Inc. and several financial institutions challenging Visa's reorganization and IPO under Section 1 of the Sherman Act and Section 7 of the Clayton Act. In the Supplemental Complaint, class plaintiffs seek unspecified monetary damages and declaratory and injunctive relief, including an order that the IPO be unwound.
On February 7, 2011, Visa entered into an omnibus agreement that confirmed and memorialized the signatories' intentions with respect to the loss sharing agreement, the judgment sharing agreement and other agreements relating to certain interchange litigation. Under the omnibus agreement, the monetary portion of any settlement of the interchange litigation covered by the omnibus agreement would be divided into a MasterCard portion at 33.3333% and a Visa portion at 66.6667%. In addition, the monetary portion of any judgment assigned to Visa-related claims in accordance with the omnibus agreement would be treated as a Visa portion. Visa would have no liability for the monetary portion of any judgment assigned to MasterCard-related claims in accordance with the omnibus agreement, and if a judgment is not assigned to Visa-related claims or MasterCard-related claims in accordance with the omnibus agreement, then any monetary liability would be divided into a MasterCard portion at 33.3333% and a Visa portion at 66.6667%. The Visa portion of a settlement or judgment covered by the omnibus agreement would be allocated in accordance with specified provisions of the Company's retrospective responsibility plan. The litigation provision on the consolidated statements of operations is not impacted by the execution of the omnibus agreement.
On July 13, 2012, Visa Inc., its wholly-owned subsidiaries Visa U.S.A. and Visa International, MasterCard Incorporated, MasterCard International Incorporated, various U.S. financial institution defendants, and the class plaintiffs signed a memorandum of understanding (the “MOU”) which obligated the parties to enter into a settlement agreement in the form attached to the MOU to resolve the class plaintiffs' claims. On October 19, 2012, those same parties signed a settlement agreement (the “Settlement Agreement”) to resolve the class plaintiffs' claims.
The terms of the Settlement Agreement include, among other terms:
•
A comprehensive release from participating class members for liability arising out of claims asserted in the litigation, and a further release to protect against future litigation regarding default interchange and the other U.S. rules at issue in the MDL;
•
Settlement payments from the Company of approximately $4.0 billion, to be paid from the Company's previously funded litigation escrow account established under the retrospective responsibility plan, see Note 3—Retrospective Responsibility Plan;
•
Distribution to class merchants of an amount equal to 10 basis points of default interchange across all credit rate categories for a period of eight consecutive months, which otherwise would have been paid to issuers and which effectively reduces credit interchange for that period of time. The eight month period for the reduction would begin within 60 days after completion of the court-ordered period during which individual class members may opt out of this settlement;
•
Certain modifications to the Company's rules, including modifications to permit surcharging on credit transactions under certain circumstances, subject to a cap and a level playing field with other general purpose card competitors; and
•
Agreement that the Company will meet with merchant buying groups that seek to negotiate interchange rates collectively.
On October 19, 2012, the class plaintiffs filed a motion for preliminary approval of the Settlement Agreement. Objections to preliminary approval were filed before the preliminary approval hearing, which was held on November 9, 2012. The court granted preliminary approval of the Settlement Agreement on November 9, 2012. Until the Settlement Agreement is finally approved by the court and any appeals are finally adjudicated, no assurance can be provided that the Company will be able to resolve the class plaintiffs' claims as contemplated by the Settlement Agreement.
In addition, on October 19, 2012, the Company and the individual plaintiffs whose claims were consolidated with the MDL for coordination of pre-trial proceedings (the “Individual Plaintiffs”) signed a settlement agreement to resolve the Individual Plaintiffs' claims against the Company for approximately $350 million. This payment was made from the litigation escrow account under the retrospective responsibility plan on October 29, 2012. On November 6, 2012, the court entered an order dismissing the Individual Plaintiffs' claims with prejudice.
For the quarter ended June 30, 2012, the Company recorded a litigation provision of $4.1 billion, which increased its total reserve for the covered litigation from $285 million to $4.4 billion, to reflect the class plaintiffs' Settlement Agreement and the resolution of the Individual Plaintiffs' claims.
Other Litigation
In re Visa Check/MasterMoney Antitrust Litigation ("the Retailers' litigation"). Beginning in October 1996, several antitrust class action lawsuits were brought by U.S. merchants against Visa U.S.A. and MasterCard. The suits were later consolidated in the U.S. District Court for the Eastern District of New York, In re Visa Check/MasterMoney Antitrust Litigation. Among other claims, the plaintiffs alleged that Visa U.S.A.'s “Honor All Cards” rule, which required merchants that accepted Visa cards to accept for payment every validly presented Visa card, and a similar MasterCard rule, constituted an illegal tying arrangement in violation of Section 1 of the Sherman Act. On June 4, 2003, the parties signed a settlement agreement that was approved by the court on December 19, 2003. Pursuant to the settlement agreement, Visa agreed to modify its “Honor All Cards” rule such that a merchant may accept only Visa check cards, only Visa credit cards, or both. Visa also agreed to pay approximately $2.0 billion to the merchant class over 10 years in equal annual installments of $200 million per year, among other things.
On August 31, 2009, Visa entered into an agreement to prepay its remaining $800 million in settlement payments for $682 million. On October 2, 2009, the court entered a final order approving the prepayment agreement, and Visa made the prepayment on October 5, 2009. Pursuant to its terms, the prepayment agreement became final after no appeals to the approval order were filed within the 30-day appeal period.
“Indirect Purchaser” Actions. Complaints were also filed in 19 different states and the District of Columbia alleging state antitrust, consumer protection and common law claims against Visa U.S.A. and MasterCard (and, in California, Visa International) on behalf of consumers. The claims in these class actions included allegations mirroring those made in the U.S. merchant lawsuit and asserting that merchants, faced with excessive merchant discount fees, passed on some portion of those fees to consumers in the form of higher prices on goods and services sold. Plaintiffs seek money damages and injunctive relief. Visa U.S.A. has been successful in the majority of these cases, as courts in 17 jurisdictions have granted Visa U.S.A.'s motions to dismiss for failure to state a claim or plaintiffs have voluntarily dismissed their complaints. In New Mexico, the court granted Visa U.S.A.'s motion to dismiss at a hearing on May 14, 2010, and entered an order and judgment dismissing the case on June 9, 2010. The plaintiff filed a notice of appeal from that order and judgment on June 14, 2010. On April 18, 2012, the state appellate court affirmed the trial court's dismissal of the case. In California, in the consolidated Credit/Debit Card Tying Cases, the court dismissed claims brought under the Cartwright Act, but denied a similar motion with respect to Unfair Competition Law claims for unlawful, unfair and/or fraudulent business practices. On October 31, 2007, the court denied the plaintiffs' motion to give collateral estoppel effect to certain elements of their “tying” claim based on statements in the ruling on cross-motions for summary judgment in In re Visa Check/MasterMoney Antitrust Litigation. On October 3, 2008, the parties agreed to confidential settlement terms to resolve the dispute. A written settlement agreement executed on September 14, 2009, was submitted to the court for approval. After the parties amended the settlement agreement in certain respects, the court entered an order preliminarily approving the settlement on January 5, 2010 and entered an order granting final approval on August 23, 2010. The plaintiff in Attridge, who had filed objections to the settlement, filed a notice of appeal from the final approval order, as have other objectors to the settlement. The amount of the settlement is not considered material to the consolidated financial statements.
On January 9, 2012, the Court of Appeal of the State of California reversed the judgment approving the settlement agreement, and the case was remanded to the trial court for consideration of the fairness and adequacy of the settlement in light of the inclusion of the Attridge claims in the release. Attridge filed a motion to disqualify the trial judge in the Credit/Debit Card Tying Cases, which was granted. On June 4, 2012, the court issued an order reassigning the case to the Honorable John E. Munter, the same judge in the Attridge case.
The parties subsequently agreed upon a revised written settlement agreement, which was submitted to the court for preliminary approval on August 20, 2012 and executed as of September 6, 2012.
Vale Canjeable. On November 21, 2006, Vale Canjeable Ticketven, C.A. filed an action in the Fifth Municipal Court of Caracas (“Fifth Municipal court”), Venezuela against Todoticket 2004, C.A., and Visa International seeking a preliminary injunction preventing use of the Visa Vale mark in Venezuela. On November 29, 2006, the Fifth Municipal court granted a preliminary injunction prohibiting defendants' use of “Vale” in the Venezuelan market of food vouchers. Visa filed a constitutional objection to that ruling on December 6, 2006. The objection was dismissed, and Visa appealed the decision through the appellate courts.
After all appeals to the lower appellate courts had been rejected, on March 14, 2008, Visa filed an extraordinary appeal of the preliminary injunction ruling with the Commercial Chamber of the Supreme Court (the “Supreme Court”). On August 6, 2008, the Supreme Court ruled in Visa's favor, declared the lower court's decision null and void, and remanded the case to the appellate court. Following the Supreme Court's order, on March 25, 2009, the First Commercial Judge of Appeals of Caracas issued a new decision, affirming the preliminary injunction and finding Visa and Todoticket liable for legal fees and costs in connection with the appeal. On July 9, 2009, Visa filed a further appeal, and on December 10, 2009, the Supreme Court again decided in Visa's favor, overturning the appellate ruling. The Supreme Court ordered a new appellate judge to consider the preliminary injunction that prevented Visa from using the Visa Vale trademark in Venezuela. On August 10, 2011, the court rejected Visa's appeal of the preliminary injunction and ordered the defendants to pay costs.
In parallel to this proceeding, in December 2006, the plaintiff also filed a claim with the Fourth Commercial Court of First Instance of Caracas (“First Instance court”), alleging that the defendants infringed the plaintiff's rights as the holder of the trademark registries and requesting declarative, injunctive and monetary relief. On September 25, 2007, Visa's request for removal of the First Instance judge from the case was granted. A new judge was assigned to finalize the discovery phase of the case. On February 11, 2010, the First Instance court dismissed in its entirety the plaintiff's claim against Visa and other defendants for damages based on trademark infringement. The plaintiff appealed. On August 10, 2011, the appellate court overturned the First Instance court's dismissal in part. The court refused to award plaintiff any damages or costs, but enjoined Visa and Todoticket from using the expression “Vale” in the Venezuelan food voucher market.
Visa filed extraordinary appeals of both August 10 rulings with the Supreme Court.
European Interchange Proceedings. On April 3, 2009, the European Commission issued a Statement of Objections (“SO”) to Visa Europe, Visa International and Visa Inc. alleging a breach of European competition law. Visa Inc. and Visa International were served with the Statement of Objections on June 1, 2009. The SO alleged a breach of Article 81 of the EC Treaty and Article 53 of the EEA Agreement. The SO was directed to Visa Inc. and Visa International with respect to the “Honor All Cards” rule, the “no-surcharge” rule, and certain debit interchange fee practices. On August 10, 2009, Visa Inc. and Visa International filed a response to the SO.
On April 26, 2010, Visa Europe announced an agreement with the European Commission, subject to public consultation, to end the proceedings with respect to Visa Europe's immediate debit interchange fees. After public consultation, on December 8, 2010, the European Commission concluded that the proposed agreement with Visa Europe addressed its competition concerns, made the agreement legally binding upon Visa Europe, and closed its investigation with regard to interchange fees for debit card transactions. On July 31, 2012, the European Commission announced a supplementary Statement of Objections that was sent to Visa Europe concerning interchange for consumer credit card transactions. Pursuant to existing agreements among the parties, Visa Europe is obligated to indemnify Visa International and Visa Inc. in connection with this proceeding, including payment of any fines that may be imposed.
Canadian Competition Proceedings
Competition Bureau. On April 21, 2009, Visa Canada Corporation (“Visa Canada”) received an oral notification from the Canadian Competition Bureau that it had initiated a civil inquiry regarding interchange and certain of Visa policies relating to merchant acceptance practices. The Bureau issued a voluntary draft information request to Visa on August 4, 2010, seeking information about certain merchant acceptance practices, interchange (including the setting of default interchange), and fees paid by issuers and acquirers to Visa.
On December 15, 2010, the Commissioner of Competition filed a Notice of Application against Visa Canada and MasterCard. The proceeding challenges certain Visa policies regarding merchant acceptance practices, including Visa's “no-surcharge” and “honour all cards” policies under the Competition Act. Visa Canada filed a Response to the Notice of Application on January 31, 2011. On February 10, 2011, Toronto Dominion Bank and the Canadian Bankers Association sought leave to intervene in the proceeding; Visa supported such requests. Following a hearing on March 7, 2011, the Competition Tribunal granted the intervention requests.
The hearing before the Competition Tribunal on the merits of the case was held from May 8, 2012 through June 21, 2012.
Merchant Litigation. On December 17, 2010, a purported civil follow-on case to the Competition Bureau's proceeding was filed against Visa Canada and MasterCard in the Superior Court of Québec, Canada, on behalf of a class of merchants and a class of consumers. The action, 9085-4886 Quebec Inc. et al. v. Visa Canada et al., asserts claims under Section 76 of the Competition Act, which does not provide for a civil cause of action. Plaintiff seeks unspecified money damages and injunctive relief.
On March 28, 2011, Mary Watson filed a class action lawsuit in the Supreme Court of British Columbia, Canada, on behalf of merchants and others in Canada that accept payment by Visa and MasterCard (Watson). The suit, filed against Visa Canada, MasterCard, and ten financial institutions, alleges conduct contrary to section 45 of the Competition Act and also asserts claims of civil conspiracy, interference with economic interests, and unjust enrichment, among others. Plaintiff alleges that Visa and MasterCard each conspired with their member financial institutions to set supra-competitive default interchange rates and merchant discount fees, and that Visa and MasterCard's respective “no-surcharge” and “honour all cards” rules had the anticompetitive effect of increasing merchant discount fees. The lawsuit seeks unspecified monetary damages and injunctive relief. On January 9, 2012, plaintiff filed a notice of application for certification of a class action. Defendants' responding certification material was delivered on October 15, 2012.
On May 16, 2011, a merchant class action which effectively mirrors the Watson case was initiated in Ontario (Bancroft-Snell). As in Watson, the Bancroft-Snell complaint alleges conduct in contravention of Section 45 of the Competition Act, civil conspiracy, interference with economic interests, and unjust enrichment, among other claims, and seeks similar relief. As a result of plaintiff's unopposed request on January 10, 2012, the Bancroft-Snell case is being held in abeyance pending further proceedings in the Watson case.
On April 10, 2012, the court in the 9085-4886 Quebec Inc. case permitted the plaintiff to revise its complaint to effectively mirror the Watson case, and to add the same ten financial institutions as co-defendants. On June 13, 2012, at plaintiff's request and in light of the proceedings in the Watson case, the court entered an order staying the case until June 21, 2013.
On July 12 and 13, 2012, merchant class actions which effectively mirror the Watson case were initiated in Saskatchewan (Canada Rent A Heater (2000) Ltd.) and Alberta (1023926 Alberta Ltd.). In light of the proceedings in the Watson case, plaintiffs' counsel in both actions advised that no further proceedings will be taken and no Statement of Defense will be required without prior reasonable notice to the parties.
Dynamic Currency Conversion. On August 31, 2010, Visa received a notice from the Australian Competition and Consumer Commission (ACCC) regarding a pending investigation into Visa's policies relating to the provision of Dynamic Currency Conversion (DCC) services. DCC refers to conversion from one currency to another, either of the price of goods or services by the merchant, or of cash withdrawals by an ATM. The ACCC has the authority to commence proceedings before the Federal Court of Australia and seek an injunction or fine if it can establish a breach of competition laws. No such proceedings have been commenced, and the potential amount of any fine cannot be estimated at this time.
Data pass litigation. On August 27, 2010, a consumer filed a class action complaint against Webloyalty.com, Inc., Amazon.com, Inc., and Visa Inc. in federal district court in Connecticut. The plaintiff claims, among other things, that consumers who made online purchases at Amazon.com were deceived into also incurring charges for services from Webloyalty.com through the alleged unauthorized passing of cardholder account information during the sales transaction (“data pass”), in violation of federal and state consumer protection statutes and common law. Visa allegedly aided and abetted the conduct of the other defendants. Plaintiff seeks damages, restitution, and injunctive relief. The plaintiff voluntarily dismissed Amazon.com as a defendant without prejudice on October 29, 2010. Webloyalty.com and Visa each filed motions to dismiss the case on November 1, 2010.
On November 19, 2010, the plaintiff filed an amended complaint, adding GameStop Corporation as a defendant, asserting additional claims against Visa under federal and state consumer protection statutes and state common law, and seeking certification of a class of persons and entities whose credit card or debit card data was improperly accessed by Webloyalty.com since October 1, 2008. Webloyalty.com asked the Judicial Panel on Multidistrict Litigation to consolidate with this case, for pretrial proceedings, a case pending in federal district court in California in which Webloyalty.com and Movietickets.com (but not Visa) are named as defendants. On February 8, 2011, the Judicial Panel on Multidistrict Litigation denied Webloyalty.com's application to consolidate the case.
On December 23, 2010, Webloyalty.com, GameStop, and Visa each filed motions to dismiss the amended complaint.
Call center litigation. On April 28, 2011, Francisco Marenco filed a request in the U.S. District Court for the Central District of California to amend his class action complaint to name Visa Inc. as the defendant. The court granted the request and Marenco filed the amended complaint on May 6, 2011. The lawsuit alleged that Visa recorded telephone calls to call center representatives without providing a disclosure that the calls may be recorded, in alleged violation of state law in California and several other states. On May 31, 2011, the parties executed a settlement agreement in an amount that is not material to Visa's consolidated financial statements. The court granted preliminary approval of the settlement on July 20, 2011, and on November 30, 2011, the court entered a final order approving the settlement and entering judgment in the case. This matter relates to and resolves the previously reported contractual indemnity claim tendered to Visa by a processing client in October 2010.
Korean Fair Trade Commission. Following a complaint lodged by a Visa client, in July 2011 the Korean Fair Trade Commission (KFTC) initiated an investigation into Visa's requirements for the processing of international transactions over VisaNet. The KFTC has the authority to issue an injunction or fine; the potential amount of any fine cannot be estimated at this time. Visa is cooperating with the investigation.
U.S. ATM Access Fee Litigation.
National ATM Council class action. On October 12, 2011, the National ATM Council and thirteen non-bank ATM operators filed a class action lawsuit against Visa (Visa Inc., Visa International Service Association, Visa U.S.A., and Plus System, Inc.) and MasterCard in U.S. District Court for the District of Columbia. The complaint challenges Visa's rule (and a similar MasterCard rule) that if an ATM operator chooses to charge consumers an access fee for a Visa or Plus transaction, that fee cannot be greater than the access fee charged for transactions on other networks. The plaintiffs claim that the rule prevents non-bank ATM operators from attracting customers through lower prices, allegedly in violation of Section 1 of the Sherman Act. The complaint requests injunctive relief, attorneys' fees, and damages “in an amount not presently known, but which is tens of millions of dollars, prior to trebling.”
On January 10, 2012, plaintiffs filed an amended class action complaint against the same defendants. Like the original complaint, the amended complaint alleges that the ATM access fee rule prevents non-bank ATM operators from attracting customers to use other networks in violation of Section 1 of the Sherman Act. The amended complaint also alleges that Visa's rule has enabled Visa to charge artificially high network fees for ATM transactions, to compensate ATM operators inadequately, and to compensate member banks excessively. Plaintiffs request injunctive relief, attorneys' fees, and treble damages.
Consumer class actions. In October 2011, three consumer class actions were filed against Visa and MasterCard in the same federal court challenging the same ATM access fee rules. One case, Genese, adds three financial institutions as defendants. All three cases purport to represent classes of consumers in claims brought under Section 1 of the Sherman Act. Stoumbos adds claims under antitrust and/or consumer protection statutes in certain states and the District of Columbia, and Bartron adds claims on behalf of sub-classes of consumers under such state laws. The consumer suits seek injunctive relief, attorneys' fees, and treble damages; Bartron and Stoumbos also seek restitution where available under state law.
On December 1, 2011, the plaintiff in the Stoumbos case filed a corrected complaint asserting the same claims as in the original complaint.
On January 10, 2012, the Bartron and Genese complaints were combined into a single amended complaint, now captioned Mackmin. The amended complaint challenges the same ATM access fee rules and names Visa, MasterCard, and three financial institutions as defendants, but the putative class representatives are different from those in the original Bartron and Genese complaints. Mackmin purports to represent classes and sub-classes of consumers in claims brought under Section 1 of the Sherman Act and the antitrust and/or consumer protection statutes in certain states and the District of Columbia. The amended complaint seeks injunctive relief, attorneys' fees, treble damages, and restitution where available under state law.
On January 30, 2012, Visa, MasterCard, and the defendant financial institutions filed motions to dismiss the complaints in the National ATM Council class action and the consumer class actions. A hearing on the motions to dismiss was held on September 5, 2012.
U.S. Department of Justice Civil Investigative Demand. On March 13, 2012, the Antitrust Division of the United States Department of Justice (the “Division”) issued a Civil Investigative Demand, or “CID,” to Visa Inc. seeking documents and information regarding a potential violation of Section 1 or 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. The CID focuses on PIN-Authenticated Visa Debit and Visa's competitive responses to the Dodd-Frank Act, including Visa's Fixed Acquirer Network Fee. Visa and its representatives have communicated and continue to communicate regularly with the Division and have provided materials in response to the CID. Visa is continuing to provide materials and cooperate with the Division in connection with the CID.
Federal Trade Commission Voluntary Access Letter. On September 21, 2012, the Bureau of Competition of the United States Federal Trade Commission (the “Bureau”) requested that Visa provide on a voluntary basis documents and information regarding potential violations of certain regulations associated with the Dodd-Frank Act, particularly Section 920(b)(1)(B) of the Electronic Funds Transfer Act, 15 U.S.C. 1693o-2, and Regulation II, 12 C.F.R. § 235.7(b) (commonly known as the “Durbin Amendment” and regulations). The request focuses on information related to the purposes, implementation, and impact of the optional PIN Debit Gateway Service. The revenue generated by the PIN Debit Gateway Service is not material to the Company's financial statements. Visa is cooperating with the Bureau and responding to its information requests.
Subsequent Events
Subsequent Events
Note 22—Subsequent Events
On October 19, 2012, Visa, MasterCard, various U.S. financial institution defendants and the class plaintiffs signed a settlement agreement to resolve the class plaintiffs' claims in the interchange MDL. Visa also signed a settlement agreement to resolve the claims brought by a group of individual merchants which were consolidated with the MDL for coordination of pre-trial proceedings. The court granted preliminary approval of the settlement agreement with the class plaintiffs on November 9, 2012. However, the settlement with the class plaintiffs is subject to final court approval, which cannot be assured until received, and to the adjudication of any appeals. See Note 3—Retrospective Responsibility Plan and Note 21—Legal Matters to our consolidated financial statements.
On October 24, 2012, the Company announced that Charles W. Scharf had been appointed to serve as Chief Executive Officer and a member of the board of directors of the Company, effective November 1, 2012.
On October 24, 2012, the Company’s board of directors declared a dividend in the aggregate amount of $0.33 per share of class A common stock (determined in the case of class B and class C common stock on an as-converted basis). See Note 15—Stockholders' Equity.
On October 24, 2012, the Company’s board of directors authorized an additional $1.5 billion share repurchase program to be in effect through October 2013. See Note 15—Stockholders' Equity.
On October 29, 2012, the Company made a payment of $350 million from the litigation escrow account to the Individual Plaintiffs' Settlement Fund. See Note 3—Retrospective Responsibility Plan and Note 21—Legal Matters to our consolidated financial statements.
Summary of Significant Accounting Policies (Policies)
Organization 
Organization. In a series of transactions from October 1 to October 3, 2007, Visa Inc. ("Visa" or the "Company") undertook a reorganization in which Visa U.S.A. Inc. ("Visa U.S.A."), Visa International Service Association ("Visa International"), Visa Canada Corporation ("Visa Canada") and Inovant LLC ("Inovant") became direct or indirect subsidiaries of Visa and established the retrospective responsibility plan ("the October 2007 reorganization" or "reorganization"). See Note 3—Retrospective Responsibility Plan. The reorganization was reflected as a single transaction on October 1, 2007 using the purchase method of accounting with Visa U.S.A. as the accounting acquirer. Visa Europe Limited ("Visa Europe") did not become a subsidiary of Visa Inc., but rather remained owned and governed by its European member financial institutions. See Note 2—Visa Europe.
Visa is a global payments technology company that connects consumers, businesses, financial institutions and governments around the world to fast, secure and reliable electronic payments. Visa and its wholly-owned consolidated subsidiaries, including Visa U.S.A., Visa International, Visa Worldwide Pte. Limited (“VWPL”), Visa Canada, Inovant and CyberSource Corporation (“CyberSource”), operate one of the world's most advanced processing networks, VisaNet. The Company provides its clients with payment processing platforms that encompass consumer credit, debit, prepaid and commercial payments, and facilitates global commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses and government entities. The Company is not a bank and does not issue cards, extend credit or set rates and fees for consumers.
Basis of presentation 
Consolidation and basis of presentation. The consolidated financial statements include the accounts of Visa and its consolidated entities and are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company consolidates its majority-owned and controlled entities, including variable interest entities (“VIEs”) for which the Company is the primary beneficiary. The Company's investments in VIEs have not been material to its consolidated financial statements as of and for the periods presented. Non-controlling interests are reported as a component of equity. All significant intercompany accounts and transactions are eliminated in consolidation.
Consolidation 
The Company has one reportable segment, “Payment Services.” The Company’s activities are interrelated and each activity is dependent upon and supportive of the other. Accordingly, all significant operating decisions are based on analysis of Visa as a single global business.
Use of estimates 
Use of estimates. The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions about future events. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Future actual results could differ materially from these estimates. The use of estimates in specific accounting policies is described further below as appropriate.
Cash and cash equivalents 
Cash and cash equivalents. Cash and cash equivalents include cash and certain highly liquid investments with original maturities of 90 days or less from the date of purchase. Cash equivalents are primarily recorded at cost, which approximates fair value.
Restricted cash--litigation escrow 
Restricted cash—litigation escrow. The Company maintains an escrow account from which settlements of, or judgments in, the covered litigation are paid. See Note 21—Legal Matters for a discussion of the covered litigation. The escrow funds are held in money market investments, together with the interest earned, less applicable taxes payable, and classified as restricted cash on the consolidated balance sheets. Interest earned on escrow funds is included in investment income, on the consolidated statements of operations.
Investments 
Investments and fair value. The Company measures certain assets and liabilities at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are reported under a three-level valuation hierarchy. The classification of the Company’s financial assets and liabilities within the hierarchy is as follows:
Level 1—Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities. The Company’s Level 1 assets include cash equivalents (money market funds), U.S. Treasury securities and equity securities. See Note 4—Fair Value Measurements and Investments.
Level 2—Inputs to the valuation methodology can include: (1) quoted prices in active markets for similar (not identical) assets or liabilities; (2) quoted prices for identical or similar assets in non-active markets; (3) inputs other than quoted prices that are observable for the asset or liability; or (4) inputs that are derived principally from or corroborated by observable market data. The Company's Level 2 assets and liabilities include U.S. government-sponsored debt securities, commercial paper, corporate debt securities, and foreign exchange derivative instruments. See Note 4—Fair Value Measurements and Investments.
Level 3—Inputs to the valuation methodology are unobservable and cannot be corroborated by observable market data. Level 3 assets include the Company's investments in auction rate securities. Level 3 liabilities include the Visa Europe put option and the earn-out related to the PlaySpan acquisition. See Note 4—Fair Value Measurements and Investments.
In May 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2011-04, which provides common fair value measurement and disclosure requirements in accordance with U.S. GAAP and International Financial Reporting Standards (“IFRS”). The Company adopted ASU 2011-04 effective January 1, 2012. The adoption did not have a material impact on the consolidated financial statements. See Note 4—Fair Value Measurements and Investments.
Trading investment securities include mutual fund equity security investments related to various employee compensation and benefit plans. Trading activity in these investments is at the direction of the Company's employees. These investments are held in a trust and are not available for the Company's operational or liquidity needs. Interest and dividend income and changes in fair value are recorded in investment income, and offset in personnel expense on the consolidated statements of operations.
Available-for-sale investment securities include investments in debt and equity securities. These securities are recorded at cost at the time of purchase and are carried at fair value. The Company considers these securities to be available-for-sale to meet working capital and liquidity needs. Investments with original maturities of greater than 90 days and stated maturities of less than one year from the balance sheet date are classified as current assets, while those with stated maturities of greater than one year from the balance sheet date are classified as non-current assets. The majority of these investments, $3.3 billion, are classified as non-current as they have stated maturities of more than one year from the balance sheet date. However, these investments are generally available to meet short-term liquidity needs. Unrealized gains and losses are reported in accumulated other comprehensive income (loss) on the consolidated balance sheets until realized. The specific identification method is used to calculate realized gain or loss on the sale of marketable securities, which is recorded in investment income on the consolidated statements of operations. Dividend and interest income are recognized when earned and are included in investment income on the consolidated statements of operations.
The Company evaluates its debt and equity securities for other-than-temporary impairment, or OTTI, on an ongoing basis. When there has been a decline in fair value of a debt or equity security below amortized cost basis, the Company recognizes OTTI if (1) it has the intent to sell the security, (2) it is more likely than not that it will be required to sell the security before recovery of the amortized cost basis, or (3) it does not expect to recover the entire amortized cost basis of the security. The Company has not presented required separate disclosures because its gross unrealized loss positions in debt or equity securities for the periods presented are not material. The Company recognized $4 million of OTTI for available-for-sale securities during fiscal 2012. The Company had no OTTI for available-for-sale securities during fiscal 2011 and 2010.
The Company applies the equity method of accounting for investments in other entities when it holds between 20% and 50% ownership in the entity or when it exercises significant influence. Under the equity method, the Company’s share of each entity’s profit or loss is reflected in the other line within the other income (expense) caption on the consolidated statements of operations. The equity method of accounting is also used for flow-through entities such as limited partnerships and limited liability companies when the investment ownership percentage is equal to or greater than 5% of outstanding ownership interests, regardless of whether the Company has significant influence over the investees.
The Company applies the historical cost method of accounting for investments in other entities when it holds less than 20% ownership in the entity and does not exercise significant influence, or for flow-through entities when the investment ownership is less than 5% and the Company does not exercise significant influence. These investments consist of equity holdings in non-public companies and are recorded in other assets on the consolidated balance sheets.
The Company regularly reviews investments accounted for under the cost and equity methods for possible impairment, which generally involves an analysis of the facts and changes in circumstances influencing the investment, expectations of the entity’s cash flows and capital needs, and the viability of its business model.
Financial instruments 
Financial instruments. The Company considers the following to be financial instruments: cash and cash equivalents, restricted cash-litigation escrow, trading and available-for-sale investment securities, settlement receivable and payable, customer collateral, non-marketable equity investments, settlement risk guarantee, derivative instruments, the Visa Europe put option and the earn-out provision related to the PlaySpan acquisition.
Settlement receivable and payable 
Settlement receivable and payable. The Company operates systems for authorizing, clearing and settling payment transactions worldwide. U.S. dollar settlements are settled within the same day and do not result in a receivable or payable balance, while settlement currencies other than the U.S. dollar generally remain outstanding for one to two business days, resulting in amounts due from and to clients. These amounts are presented as settlement receivable and payable on the consolidated balance sheets, respectively.
Customer collateral 
Customer collateral. The Company holds cash deposits and other non-cash assets from certain clients in order to ensure their performance of settlement obligations arising from credit, debit and travelers cheque product clearings. The cash collateral assets are restricted and fully offset by corresponding liabilities and both balances are presented on the consolidated balance sheets. Non-cash collateral assets are held on behalf of the Company by a third party and are not recorded on the consolidated balance sheets.
Client incentives 
Client incentives. The Company enters into incentive agreements with select clients and other business partners designed to build payments volume, increase product acceptance and win merchant preference to route transactions over our network. These incentives are primarily accounted for as reductions to operating revenues or as operating expenses if a separate identifiable benefit at fair value can be established. The Company generally capitalizes advance incentive payments under these agreements if select criteria are met. The capitalization criteria include the existence of future economic benefits to Visa, the existence of legally enforceable recoverability clauses, such as early termination clauses, management's ability and intent to enforce the recoverability clauses and the ability to generate future earnings from the agreement in excess of amounts deferred. Capitalized amounts are amortized over the shorter of the period of contractual recoverability or the corresponding period of economic benefit. Incentives not yet paid are accrued systematically and rationally based on management's estimate of each client's performance. These accruals are regularly reviewed and estimates of performance are adjusted, as appropriate, based on changes in performance expectations, actual client performance, amendments to existing contracts or the execution of new contracts.
Property, equipment and technology, net 
Property, equipment and technology, net. Property, equipment and technology are recorded at historical cost less accumulated depreciation and amortization, which are computed on a straight-line basis over the asset’s estimated useful life. Depreciation and amortization of technology, furniture, fixtures and equipment are computed over estimated useful lives ranging from 2 to 7 years. Capital leases are amortized over the lease term and leasehold improvements are amortized over the shorter of the useful life of the asset or lease term. Building improvements are depreciated between 3 and 40 years, and buildings are depreciated over 40 years. Improvements that increase functionality of the asset are capitalized and depreciated over the asset’s remaining useful life. Land and construction-in-progress are not depreciated. Fully depreciated assets are retained in property, equipment and technology, net, until removed from service.
Technology includes purchased and internally developed software, including technology assets obtained through acquisitions. Internally developed software represents software primarily used by the VisaNet electronic payment network and CyberSource platform. Internal and external costs incurred during the preliminary project stage are expensed as incurred. Qualifying costs incurred during the application development stage are capitalized. Once the project is substantially complete and ready for its intended use these costs are amortized on a straight-line basis over the technology's estimated useful life. Acquired technology assets are initially recorded at fair value and amortized on a straight-line basis over the estimated useful life.
The Company evaluates the recoverability of long-lived assets for impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. If the sum of expected undiscounted future cash flows is less than the carrying amount of an asset or asset group, an impairment loss is recognized to the extent that the carrying amount of the asset or asset group exceeds its fair value.
Leases 
Leases. The Company enters into operating and capital leases for the use of premises, software and equipment. Rent expense related to operating lease agreements which may or may not contain lease incentives is primarily recorded on a straight-line basis over the lease term.
Intangible assets, net 
Intangible assets, net. The Company records identifiable intangible assets at fair value on the date of acquisition and evaluates the useful life of each asset.
Finite-lived intangible assets primarily consist of customer relationships, reacquired rights, reseller relationships and tradenames obtained through acquisitions. Finite-lived intangible assets are amortized on a straight-line basis and are tested for recoverability if events or changes in circumstances indicate that their carrying amounts may not be recoverable. These intangibles have useful lives ranging from 1 to 15 years. No events or changes in circumstances indicate that impairment existed as of September 30, 2012. See Note 5—Acquisitions and Note 8—Intangible Assets, Net.
Indefinite-lived intangible assets consist of tradename, customer relationships and the Visa Europe franchise right acquired in the October 2007 reorganization. Intangible assets with indefinite useful lives are not amortized but are evaluated for impairment annually or more frequently if events or changes in circumstances indicate that impairment may exist. The Company tests each category of indefinite-lived intangible assets for impairment on an aggregate basis, which may require the allocation of cash flows and/or an estimate of fair value to the assets or asset group. Impairment exists if the fair value of the indefinite-lived intangible asset is less than the carrying value. The Company relies on a number of factors when completing impairment assessments, including a review of discounted future cash flows, business plans and the use of present value techniques.
Goodwill 
Goodwill. Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. Goodwill is not amortized but is evaluated for impairment at the reporting unit level annually as of February 1, or more frequently if events or changes in circumstances indicate that impairment may exist.
Effective October 1, 2011, the Company adopted ASU 2011-08, which allows the Company to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. This step serves as the basis for determining whether it is necessary to perform the two-step goodwill impairment test. The two-step test first compares the fair value of the reporting unit to its carrying value. If the fair value exceeds the carrying value, no impairment exists, and the second step is not performed. If the fair value is less than the carrying value, the second step is performed to compute the amount of the impairment by comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. The adoption did not have a material impact on the consolidated financial statements.
Accrued litigation 
Accrued litigation. The Company evaluates the likelihood of an unfavorable outcome in legal or regulatory proceedings to which it is a party and records a loss contingency when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These judgments are subjective, based on the status of such legal or regulatory proceedings, the merits of the Company's defenses and consultation with corporate and external legal counsel. Actual outcomes of these legal and regulatory proceedings may differ materially from the Company's estimates. Litigation accruals associated with settled obligations to be paid over periods longer than one year are recorded at the present value of future payment obligations. The obligation is accreted to its full payment value with the corresponding accretion charge included in interest expense on the consolidated statements of operations. The Company expenses legal costs as incurred in professional fees. See Note 21—Legal Matters.
Revenue re
Revenue recognition 
Revenue recognition. The Company's operating revenues are comprised principally of service revenues, data processing revenues, international transaction revenues and other revenues, reduced by costs incurred under client incentives arrangements. The Company recognizes revenue when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.
Service revenues consist primarily of revenues earned for providing clients with a supported global business infrastructure and for services which support the various product platforms that enable clients to deliver Visa products and payment services. Current quarter service revenues are primarily assessed using a calculation of pricing applied to the prior quarter's payments volume. The Company also earns revenues from assessments designed to support ongoing acceptance and volume growth initiatives, which are recognized in the same period the related volume is transacted.
Data processing revenues represent revenues earned for authorization, clearing, settlement, transaction processing services, network access and other maintenance and support services that facilitate transaction and information processing among the Company's clients globally and Visa Europe. Data processing revenues are also earned for transactions processed by CyberSource's online payment gateway and PlaySpan's virtual goods payment platform. Data processing revenues are recognized in the same period the related transactions occur or services are rendered.
International transaction revenues are earned for processing cross-border transactions, and currency conversion activities. Cross-border transactions arise when the cardholder's issuer country is different from the merchant's country. International transaction revenues are generally driven by cross-border payments and cash volume.
Other revenues consist primarily of license fees for use of the Visa brand, revenues earned from Visa Europe in connection with the Visa Europe Framework Agreement (see Note 2—Visa Europe), fees from cardholder services, licensing and certification and certain activities related to the Company's acquired entities. Other revenues also include optional service or product enhancements, such as extended cardholder protection and concierge services. Other revenues are recognized in the same period the related transactions occur or services are rendered.
Marketing. The Company expenses costs for the production of advertising as incurred. The cost of media advertising is expensed when the advertising takes place. Spons
Marketing 
Marketing. The Company expenses costs for the production of advertising as incurred. The cost of media advertising is expensed when the advertising takes place. Sponsorship costs are recognized over the period in which the Company benefits from the sponsorship rights. Promotional items are expensed as incurred, when the related services are received, or when the related event occurs.
Income taxes 
Income taxes. The Company's income tax expense consists of two components: current and deferred. Current income tax expense represents taxes paid or payable for the current period. Deferred tax assets and liabilities are recognized to reflect the future tax consequences attributable to temporary differences between the financial statement carrying amounts and the respective tax basis of existing assets and liabilities, and operating loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. In assessing whether deferred tax assets are realizable, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. A valuation allowance is recorded for the portions that are not expected to be realized based on the level of historical taxable income, projections of future taxable income over the periods in which the temporary differences are deductible, and qualifying tax planning strategies.
Where interpretation of the tax law may be uncertain, the Company recognizes, measures and discloses income tax uncertainties. The Company accounts for interest expense and penalties related to uncertain tax positions in other income (expense) in the consolidated statements of operations. The Company files a consolidated federal income tax return and, in certain states, combined state tax returns. Foreign taxes paid have historically been deducted to reduce federal income taxes payable. The Company intends to elect to claim foreign tax credits in any given year if such election is beneficial to the Company.
Pension and other postretirement benefit plans 
Pension and other postretirement benefit plans. The Company’s defined benefit pension and other postretirement benefit plans are actuarially evaluated, incorporating various critical assumptions including the discount rate and the expected rate of return on plan assets (for qualified pension plans). The discount rate is based on a "bond duration matching" methodology, which reflects the matching of projected plan obligation cash flows to an average of high-quality corporate bond yield curves whose duration matches the projected cash flows. The expected rate of return on pension plan assets considers the current and expected asset allocation, as well as historical and expected returns on each plan asset class. Any difference between actual and expected plan experience, including asset return experience, in excess of a 10% corridor is recognized in net periodic pension cost over the expected average employee future service period, approximately 8 years for United States plans. Other assumptions involve demographic factors such as retirement age, mortality, attrition and the rate of compensation increases. The Company evaluates assumptions annually and modifies them as appropriate.
The Company recognizes the funded status of its benefit plans in its consolidated balance sheets as other assets, accrued liabilities, and other liabilities. The Company recognizes settlement losses when it settles pension benefit obligations, including making lump-sum cash payments to plan participants in exchange for their rights to receive specified pension benefits, when certain thresholds are met.
Foreign currency remeasurement and translation 
Foreign currency remeasurement and translation. The Company's functional currency is the U.S. dollar for the majority of its foreign operations. Transactions denominated in currencies other than the applicable functional currency are converted to the functional currency at the exchange rate on the transaction date. At period end, monetary assets and liabilities are remeasured to the functional currency using exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are remeasured at historical exchange rates. Gains and losses related to conversion and remeasurement are recorded in general and administrative expense in the consolidated statements of operations.
For certain foreign operations, the Company's functional currency may be the local currency in which a foreign subsidiary executes its business transactions. Translation from the local currency to the U.S. dollar is performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for revenue and expense accounts using an average exchange rate for the period. Resulting translation adjustments are reported as a component of accumulated other comprehensive income (loss) on the consolidated balance sheets.
Derivative financial instruments 
Derivative financial instruments. The Company uses forward foreign exchange contracts to reduce its exposure to foreign currency rate changes on non-functional currency denominated forecasted operational cash flows. Derivatives are carried at fair value on a gross basis in either prepaid and other current assets or accrued liabilities on the consolidated balance sheets. Gains and losses resulting from changes in fair value of derivative instruments are accounted for either in accumulated other comprehensive income (loss) on the consolidated balance sheets, or in the consolidated statements of operations (in the corresponding account where revenue or expense is hedged, or to general and administrative for hedge amounts determined to be ineffective) depending on whether they are designated and qualify for hedge accounting. Fair value represents the difference in the value of the derivative financial instruments at the contractual rate and the value at current market rates, and generally reflects the estimated amounts that the Company would receive or pay to terminate the contracts at the reporting date based on broker quotes for the same or similar instruments.
Additional disclosures that demonstrate how derivative instruments and related hedged items affect an entity's financial position, financial performance and cash flows have not been presented because the impact of derivative instruments is immaterial to the overall consolidated financial statements.
Guarantees and indemnifications 
Guarantees and indemnifications. The Company recognizes an obligation at inception for guarantees and indemnifications that qualify for recognition, regardless of the probability of occurrence. The Company indemnifies issuing and acquiring clients from settlement losses suffered by the failure of any other customer to honor drafts, travelers cheques, or other instruments processed in accordance with Visa's operating regulations. The estimated fair value of the liability for settlement indemnification is included in accrued liabilities on the consolidated balance sheets and is described in Note 12—Settlement Guarantee Management. The Company also indemnifies Visa Europe for any claims brought against Visa Europe arising out of the provision of services by Visa's customer financial institutions, as described in Note 2—Visa Europe.
Share-based compensation 
Share-based compensation. The Company recognizes share-based compensation cost using the fair value method of accounting. The Company recognizes compensation cost for awards with only service conditions on a straight-line basis over the requisite service period, which is generally the vesting period. Compensation cost for performance- and market-condition-based awards is recognized on a graded-vesting basis. The amount is initially estimated based on target performance and is adjusted as appropriate based on management's best estimate throughout the performance period. See Note 17—Share-based Compensation.
Earnings per share 
Earnings per share. The Company calculates earnings per share using the two-class method to reflect the different rights of each class and series of outstanding common stock. The dilutive effect of incremental common stock equivalents is reflected in diluted earnings per share by application of the treasury stock method. See Note 16—Earnings Per Share.
Recently Issued Accounting Pronouncements 
Recently Issued Accounting Pronouncements
In December 2010, the FASB issued ASU 2010-29, which provides requirements over pro forma revenue and earnings disclosures related to business combinations. The ASU requires disclosure of revenue and earnings of the combined business as if the combination occurred at the start of the prior annual reporting period only. The Company adopted ASU 2010-29 effective October 1, 2011. The adoption did not have a material impact on the consolidated financial statements.
In June 2011, the FASB issued ASU 2011-05, which impacts the presentation of comprehensive income. The guidance requires components of other comprehensive income to be presented with net income to arrive at total comprehensive income. This ASU impacts presentation only and does not impact the underlying components of other comprehensive income or net income. In December 2011, the FASB issued an amendment to ASU 2011-05, which defers the requirement to present components of reclassifications of other comprehensive income on the face of the income statement. All other components of ASU 2011-05 are effective October 1, 2012. Adoption is not expected to have a material impact on the consolidated financial statements.
In July 2012, the FASB issued ASU 2012-02, which will allow an entity to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test for indefinite-lived intangible assets. The standard will be adopted on October 1, 2012, and is not expected to have a material impact on the consolidated financial statements.
Retrospective Responsibility Plan (Tables)
Schedule of Restricted Cash and Cash Equivalents
The following table sets forth the changes in the litigation escrow account:
 
Fiscal 2012
 
Fiscal 2011
 
(in millions)
Balance at October 1
$
2,857

 
$
1,936

Deposits into the litigation escrow account
1,715

 
1,200

American Express settlement payments
(140
)
 
(280
)
Interest earned, less applicable taxes
—

 
1

Balance at September 30
$
4,432

 
$
2,857

Individual Plaintiffs' Settlement Fund payment—(See Note 21—Legal Matters)
(350
)
 
 
Balance at October 29
$
4,082

 
 
Fair Value Measurements and Investments (Tables)
Fair Value, Assets and Liabilities Measured on Recurring Basis 
Assets and Liabilities Measured at Fair Value on a Recurring Basis
 
Fair Value Measurements at September 30
Using Inputs Considered as
 
Level 1
 
Level 2
 
Level 3
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
 
(in millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents and restricted cash
 
 
 
 
 
 
 
 
 
 
 
Money market funds
$
5,676

 
$
4,225

 
 
 
 
 
 
 
 
U.S. government-sponsored debt securities
 
 
 
 
$
—

 
$
175

 
 
 
 
Commercial paper
 
 
 
 
93

 
—

 
 
 
 
Investment securities
 
 
 
 
 
 
 
 
 
 
 
U.S. government-sponsored debt securities
 
 
 
 
2,821

 
1,568

 
 
 
 
U.S. Treasury securities
1,066

 
350

 
 
 
 
 
 
 
 
Equity securities
68

 
57

 
 
 
 
 
 
 
 
Corporate debt securities
 
 
 
 
63

 
—

 
 
 
 
Auction rate securities
 
 
 
 
 
 
 
 
$
7

 
$
7

Prepaid and other current assets
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange derivative instruments
 
 
 
 
13

 
30

 
 
 
 
 
$
6,810

 
$
4,632

 
$
2,990

 
$
1,773

 
$
7

 
$
7

Liabilities
 
 
 
 
 
 
 
 
 
 
 
Accrued liabilities
 
 
 
 
 
 
 
 
 
 
 
Visa Europe put option
 
 
 
 
 
 
 
 
$
145

 
$
145

Earn-out related to PlaySpan acquisition
 
 
 
 
 
 
 
 
12

 
24

Foreign exchange derivative instruments
 
 
 
 
$
11

 
$
7

 
 
 
 
Available-for-sale Securities 
The amortized cost, unrealized gains and losses and fair value of available-for-sale investment securities are as follows:
 
September 30, 2012

 
September 30, 2011

 
Amortized
Cost
 
Gross Unrealized
 
Fair
Value
 
Amortized
Cost
 
Gross Unrealized
 
Fair
Value
 
Gains
 
Losses
 
Gains
 
Losses
 
 
(in millions)
U.S. Treasury securities
$
1,065

 
$
1

 
$
—

 
$
1,066

 
$
350

 
$
—

 
$
—

 
$
350

U.S. government-sponsored debt securities
2,818

 
3

 
—

 
2,821

 
1,568

 
—

 
—

 
1,568

Corporate debt securities
63

 
—

 
—

 
63

 
—

 
—

 
—

 
—

Auction rate and equity securities
11

 
—

 
(1
)
 
10

 
7

 
—

 
—

 
7

Total
$
3,957

 
$
4

 
$
(1
)
 
$
3,960

 
$
1,925

 
$
—

 
$
—

 
$
1,925

Less: current portion of available-for-sale investment securities
 
 
 
 
 
 
(677
)
 
 
 
 
 
 
 
(1,214
)
Long-term available-for-sale investment securities
 
 
 
 
 
 
$
3,283

 
 
 
 
 
 
 
$
711

Available for Sale Investments Classified by Contractual Maturity Date 
The majority of these investments, $3.3 billion, are classified as non-current, as they have stated maturities of more than one year from the balance sheet date. However, these investments are generally available to meet short-term liquidity needs.
 
Amortized Cost
 
Fair Value
 
(in millions)
September 30, 2012:
 
 
 
Due within one year
$
674

 
$
674

Due after 1 year through 5 years
3,272

 
3,276

Due after 5 years through 10 years
—

 
—

Due after 10 years
7

 
7

Total
$
3,953

 
$
3,957


Investment Income 
Investment income consisted of the following:
 
For the Years Ended
September 30,
 
2012
 
2011
 
2010
 
(in millions)
Interest and dividend income on cash and investments
$
17

 
$
16

 
$
26

Gain on other investments
17

 
92

 
20

Investment securities—trading:
 
 
 
 
 
Unrealized (losses) gains, net
9

 
(5
)
 
3

Realized gains (losses), net
(1
)
 
1

 
1

Investment securities—available-for-sale:
 
 
 
 
 
Realized gains (losses), net
—

 
4

 
2

Other-than-temporary impairment on investments
(6
)
 
—

 
(3
)
Investment income
$
36

 
$
108

 
$
49

Acquisitions (Tables)
Schedule of Business Acquisitions, by Acquisition 
Total purchase consideration was approximately $2 billion, paid with cash on hand as follows:
 
Purchase Consideration
 
(in millions)
Acquisition of approximately 72 million shares of outstanding common stock of CyberSource at $26.00 per share
$
1,866

Fair value of earned stock options settled
86

Total purchase price
$
1,952

Schedule of Acquired Finite-Lived Intangible Assets by Major Class 
The following table summarizes the fair value of the acquired intangible assets. See Note 8—Intangible Assets, Net.
 
Fair Value
 
Weighted-Average
Useful Life
 
(in millions)
 
 
Customer relationships
$
320

 
10

Reseller relationships
95

 
9

Tradenames
190

 
15

Total amortizable intangible assets
$
605

 
12


Business Combination and Asset Purchase Disclosure 
The following table summarizes the purchase price allocation.
 
Fair Value
 
(in millions)
Tangible assets, net (1)
$
27

Finite-lived intangible assets with a weighted-average useful life of 5 years
5

Goodwill
80

Net deferred tax liabilities
(2
)
Net assets acquired
$
110

(1) 
Tangible assets, net, include $25 million of technology assets acquired, which have a useful life of 5 years and are recognized in property, equipment and technology, net, on the consolidated balance sheets.
Business Combination and Asset Purchase Disclosure 
The following table summarizes the allocation of the accounting purchase consideration.
 
Fair Value
 
(in millions)
Tangible assets, net(1)
$
67

Finite-lived intangible assets with a weighted-average useful life of 2.8 years
15

Goodwill
141

Net deferred tax liabilities
(19
)
Net assets acquired
$
204

(1) 
Tangible assets, net, include $56 million of technology assets acquired, which have a weighted-average useful life of 5 years and are recognized in property, equipment and technology, net, on the consolidated balance sheets.
Schedule of Business Acquisitions, by Acquisition 
The following table presents the total purchase consideration for the PlaySpan acquisition.
 
Potential
Purchase
Consideration
 
Accounting
Purchase
Consideration
 
(in millions)
Cash paid
$
180

 
$
180

Earn-out provision(1)
40

 
40

Less: Employee compensation(2)
 
 
(12
)
Valuation adjustment(3)
 
 
(4
)
Fair value of earn-out provision (See Note 4—Fair Value Measurements and Investments)
 
 
24

Fair value of stock options issued(4)
5

 
 
Total purchase consideration
$
225

 
$
204

(1) 
The acquisition agreement includes a potential earn-out provision of up to $40 million, should PlaySpan achieve certain revenue targets and other milestones.
(2) 
The amount reflects personnel expense related to the earn-out provision incurred during the performance period.
(3) 
Adjustment to reflect the earn-out provision at fair value based on the assumed likelihood of the future revenue targets and other milestones being met.
(4) 
The Company issued non-qualified stock options to replace unvested, in-the-money stock options held by PlaySpan employees. See Note 17—Share-based Compensation.
Business Combination and Asset Purchase Disclosure 
The following table summarizes the purchase price allocation.
 
Fair Value
Tangible assets and liabilities
(in millions)
Current assets
$
259

Non-current assets(1)
150

Current liabilities
(45
)
Non-current liabilities
(256
)
Intangible assets
605

Goodwill
1,239

Net assets acquired
$
1,952

(1) 
Non-current assets include $122 million of technology assets acquired, which have a weighted-average useful life of 7 years and are recognized in property, equipment and technology, net, on the consolidated balance sheets.
Prepaid Expenses and Other Assets (Tables)
Prepaid Expenses and Other Current Assets Disclosure 
Prepaid expenses and other current assets consisted of the following:
 
September 30,
2012
 
September 30,
2011
 
(in millions)
Prepaid expenses and maintenance
$
69

 
$
96

Income tax receivable—(See Note 20—Income Taxes)
179

 
112

Foreign exchange derivative instruments—(See Note 13—Derivative Financial Instruments)
13

 
30

Other
40

 
27

Total
$
301

 
$
265

Schedule of Other Assets, Noncurrent 
Other non-current assets consisted of the following: 
 
September 30,
2012
 
September 30,
2011
 
(in millions)
Other investments—(See Note 4—Fair Value Measurements and Investments)
$
86

 
$
100

Pension asset—(See Note 11—Pension, Postretirement and Other Benefits)
23

 
—

Long-term prepaid expenses and other
42

 
29

Total
$
151

 
$
129

Property, Equipment and Technology, Net (Tables)
Property, Plant and Equipment 
Property, equipment and technology, net, consisted of the following:
 
September 30,
2012
 
September 30,
2011
 
(in millions)
Land
$
71

 
$
71

Buildings and building improvements
751

 
719

Furniture, equipment and leasehold improvements
837

 
755

Construction-in-progress
69

 
89

Technology
1,353

 
1,115

Total property, equipment and technology
3,081

 
2,749

Accumulated depreciation and amortization
(1,447
)
 
(1,208
)
Property, equipment and technology, net
$
1,634

 
$
1,541

Expected amortization expense 
At September 30, 2012, estimated future amortization expense on technology was as follows:
Fiscal (in millions)
2013
 
2014
 
2015
 
2016
 
2017 and
thereafter
 
Total
Estimated future amortization expense
$
148

 
$
132

 
$
120

 
$
88

 
$
53

 
$
541

Intangible Assets, Net (Tables)
Schedule of Intangible Assets by Major Class 
Indefinite-lived and finite-lived intangible assets consisted of the following: 
 
September 30, 2012
 
September 30, 2011
 
Gross
 
Accumulated
Amortization
 
Net
 
Gross
 
Accumulated
Amortization
 
Net
 
(in millions)
Finite-lived intangible assets
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
$
339

 
$
(84
)
 
$
255

 
$
337

 
$
(44
)
 
$
293

Tradenames
192

 
(28
)
 
164

 
192

 
(15
)
 
177

Reseller relationships
95

 
(25
)
 
70

 
95

 
(13
)
 
82

Other
52

 
(4
)
 
48

 
2

 
(1
)
 
1

Total finite-lived intangible assets
$
678

 
$
(141
)
 
$
537

 
$
626

 
$
(73
)
 
$
553

Indefinite-lived intangible assets
 
 
 
 
$
10,883

 
 
 
 
 
$
10,883

Total intangible assets, net
 
 
 
 
$
11,420

 
 
 
 
 
$
11,436

Schedule of Amortization Expense 
At September 30, 2012, estimated future amortization expense on finite-lived intangible assets is as follows:
Fiscal (in millions)
2013
 
2014
 
2015
 
2016
 
2017 and
thereafter
 
Total
Estimated future amortization expense
$
69

 
$
66

 
$
62

 
$
49

 
$
291

 
$
537

Accrued and Other Liabilities (Tables)
Accrued Liabilities Table 
Accrued liabilities consisted of the following:
 
September 30,
2012
 
September 30,
2011
 
(in millions)
Accrued operating expenses
$
194

 
$
175

Visa Europe put option—(See Note 2—Visa Europe)(1)
145

 
145

Deferred revenue
59

 
63

Accrued marketing and product expenses
22

 
36

Accrued income taxes—(See Note 20—Income taxes)
58

 
63

Other
106

 
80

Total
$
584

 
$
562


Other Noncurrent Liabilities, Table 
Other long-term liabilities consisted of the following:
 
September 30,
2012
 
September 30,
2011
 
(in millions)
Accrued income taxes—(See Note 20—Income Taxes)
$
171

 
$
468

Employee benefits
93

 
106

Other
107

 
93

Total
$
371

 
$
667

(1) 
The put option is exercisable at any time at the sole discretion of Visa Europe with payment required 285 days thereafter. Classification in current liabilities is not an indication of management’s expectation of exercise and simply reflects the fact that the obligation resulting from the exercise of the instrument could become payable within 12 months.
Pension, Postretirement and Other Benefits (Tables)
Plans With Accumulated And Projected Benefit Obligations In Excess Of The Fair Value Of Plan Assets, Disclosure 
Benefit obligation and fair value of plan assets with obligations in excess of plan assets:
 
Pension Benefits
September 30,
 
2012
 
2011
 
(in millions)
Accumulated benefit obligation in excess of plan assets
 
 
 
Accumulated benefit obligation—end of year
$
(39
)
 
$
(839
)
Fair value of plan assets—end of year
—

 
783

Projected benefit obligation in excess of plan assets
 
 
 
Benefit obligation—end of year
$
(40
)
 
$
(839
)
Fair value of plan assets—end of year
—

 
783

Change in Benefit Obligation:
 
Pension Benefits
 
Other
Postretirement Benefits
 
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
 
(in millions)
Benefit obligation—beginning of fiscal year
$
839

 
$
743

 
$
38

 
$
34

Service cost
38

 
41

 
—

 
—

Interest cost
40

 
38

 
1

 
1

Actuarial loss (gain)
132

 
77

 
(3
)
 
7

Benefit payments
(60
)
 
(63
)
 
(4
)
 
(4
)
Settlements
1

 
3

 
—

 
—

Benefit obligation—end of fiscal year
$
990

 
$
839

 
$
32

 
$
38

Accumulated benefit obligation
$
982

 
$
839

 
NA

 
NA

Change in Plan Assets:
 
 
 
 
 
 
 
Fair value of plan assets—beginning of fiscal year
$
783

 
$
766

 
$
—

 
$
—

Actual return on plan assets
166

 
10

 
—

 
—

Company contribution
84

 
70

 
4

 
4

Benefit payments
(60
)
 
(63
)
 
(4
)
 
(4
)
Fair value of plan assets—end of fiscal year
$
973

 
$
783

 
$
—

 
$
—

Funded status at end of fiscal year
$
(17
)
 
$
(56
)
 
$
(32
)
 
$
(38
)
Recognized in Consolidated Balance Sheets:
 
 
 
 
 
 
 
Non-current asset
$
23

 
$
—

 
$
—

 
$
—

Current liability
(8
)
 
(4
)
 
(4
)
 
(4
)
Non-current liability
(32
)
 
(52
)
 
(28
)
 
(34
)
Funded status at end of fiscal year
$
(17
)
 
$
(56
)
 
$
(32
)
 
$
(38
)
 
 
 
 
 
 
 
 
Pension and Other Postretirement Benefits, Recognized in Accumulated Comprehensive Income (Loss) Disclosure 
Amounts recognized in accumulated other comprehensive income before tax: 
 
Pension Benefits
 
Other
Postretirement Benefits
September 30,
 
September 30,
 
2012
 
2011
 
2012
 
2011
 
(in millions)
Net actuarial loss (gain)
$
328

 
$
343

 
$
(3
)
 
$
1

Prior service credit
(33
)
 
(42
)
 
(14
)
 
(17
)
Total
$
295

 
$
301

 
$
(17
)
 
$
(16
)
Pension And Other Postretirement Benefits, Expected Amortization Of Accumulated Other Comprehensive Income, Disclosure 
Amounts from accumulated other comprehensive income to be amortized into net periodic benefit cost in fiscal 2013: 
 
Pension  Benefits
 
Other
Postretirement
 Benefits
 
(in millions)
Actuarial loss
$
28

 
$
—

Prior service credit
(9
)
 
(3
)
Total
$
19

 
$
(3
)
Schedule of Defined Benefit Plans Disclosures 
Net periodic pension and other postretirement plan cost:
 
Pension Benefits
 
Other
Postretirement Benefits
Fiscal
 
2012
 
2011
 
2010
 
2012
 
2011
 
2010
 
(in millions)
Service cost
$
38

 
$
41

 
$
45

 
$
—

 
$
—

 
$
—

Interest cost
40

 
38

 
40

 
1

 
1

 
1

Expected return on assets
(55
)
 
(54
)
 
(50
)
 
—

 
—

 
—

Amortization of:
 
 
 
 
 
 
 
 
 
 
 
Prior service credit
(9
)
 
(9
)
 
(9
)
 
(3
)
 
(3
)
 
(3
)
Actuarial loss (gain)
33

 
19

 
16

 
—

 
(1
)
 
(1
)
Net benefit cost
$
47

 
$
35

 
$
42

 
$
(2
)
 
$
(3
)
 
$
(3
)
Settlement loss
3

 
2

 
—

 
—

 
—

 
—

Total net periodic benefit cost
$
50

 
$
37

 
$
42

 
$
(2
)
 
$
(3
)
 
$
(3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension and Other Postretirement Benefits, Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Loss (Income) Disclosure 
Other changes in plan assets and benefit obligations recognized in other comprehensive income: 
 
Pension Benefits
 
Other
Postretirement Benefits
2012
 
2011
 
2012
 
2011
 
(in millions)
Current year actuarial loss (gain)
$
21

 
$
124

 
$
(3
)
 
$
7

Amortization of actuarial (loss) gain
(36
)
 
(21
)
 
—

 
1

Amortization of prior service credit
9

 
9

 
3

 
3

Total (gain) loss recognized in other comprehensive income
$
(6
)
 
$
112

 
$
—

 
$
11

Total recognized in net periodic benefit cost and other comprehensive income
$
44

 
$
149

 
$
(2
)
 
$
8

 
 
 
 
 
 
 
 
Pension and Other Postretirement Benefits, Net Periodic Benefit Costs Weighted Average Assumptions Disclosure 
Weighted Average Actuarial Assumptions:
 
Fiscal
 
2012
 
2011
 
2010
Discount rate for benefit obligation(1)
 
 
 
 
 
Pension
3.85
%
 
4.70
%
 
5.25
%
Postretirement
2.21
%
 
3.39
%
 
3.45
%
Discount rate for net periodic benefit cost
 
 
 
 
 
Pension
4.70
%
 
5.25
%
 
5.63
%
Postretirement
3.39
%
 
3.45
%
 
4.43
%
Expected long-term rate of return on plan assets(2)
7.50
%
 
7.50
%
 
7.50
%
Rate of increase in compensation levels for:
 
 
 
 
 
Benefit obligation
4.50
%
 
4.50
%
 
4.50
%
Net periodic benefit cost
4.50
%
 
4.50
%
 
5.50
%
(1) 
Based on a “bond duration matching” methodology, which reflects the matching of projected plan liability cash flows to an average of high-quality corporate bond yield curves whose duration matches the projected cash flows.
(2) 
Primarily based on the targeted allocation, and evaluated for reasonableness by considering such factors as: (i) actual return on plan assets; (ii) historical rates of return on various asset classes in the portfolio; (iii) projections of returns on various asset classes; and (iv) current and prospective capital market conditions and economic forecasts.
The assum
Fair Value of Net Pension Plan Assets Disclosure 
wing table sets forth by level, within the fair value hierarchy, the plan’s investments at fair value as of September 30, 2012 and 2011, including the impact of unsettled transactions:
 
 
Fair Value Measurements at September 30
 
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
 
2012
 
2011
 
 
(in millions)
Cash equivalents
$
79

 
$
55

 
 
 
 
 
 
 
 
 
$
79

 
$
55

Collective investment funds
 
 
 
 
$
391

 
$
289

 
 
 
 
 
391

 
289

Corporate debt securities
 
 
 
 
115

 
122

 
 
 
 
 
115

 
122

Debt securities of U.S. Treasury and federal agencies
 
 
 
 
121

 
104

 
 
 
 
 
121

 
104

Asset-backed securities
 
 
 
 
 
 
 
 
$
25

 
$
33

 
25

 
33

Equity securities
242

 
180

 
 
 
 
 
 
 
 
 
242

 
180

Total
$
321

 
$
235

 
$
627

 
$
515

 
$
25

 
$
33

 
$
973

 
$
783

Level 1
Pension and Other Postretirement Benefits, Employer Contributions and Expected Benefit Payments Disclosure 
 
Pension
Benefits
 
Other
Postretirement
Benefits
Actual employer contributions
(in millions)
2012
$
84

 
$
4

2011
70

 
4

Expected employer contributions
 
 
 
2013
$
48

 
4

Expected benefit payments
 
 
 
2013
$
116

 
$
4

2014
117

 
4

2015
107

 
4

2016
108

 
4

2017
100

 
4

2018-2022
419

 
13

Other Ben
Settlement Guarantee Management (Tables)
Schedule of Customer Collateral
The Company maintained collateral as follows:
 
September 30,
2012
 
September 30,
2011
 
(in millions)
Cash equivalents
$
823

 
$
931

Pledged securities at market value
307

 
296

Letters of credit
1,084

 
902

Guarantees
2,022

 
1,845

Total
$
4,236

 
$
3,974

 
Enterprise-wide Disclosures and Concentration of Business (Tables)
Schedule of long-lived net property, equipment and technology assets by major geographic area
The Company’s long-lived net property, equipment and technology assets are classified by major geographic area as follows:
 
September 30,
2012
 
September 30,
2011
 
(in millions)
U.S.
$
1,539

 
$
1,487

Non-U.S.
95

 
54

Total
$
1,634

 
$
1,541

Stockholders' Equity (Tables)
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Stockholders' Equity Note [Abstract]
 
 
Schedule of Treasury Stock by Class [Table Text Block]
 
Text Block 
Schedule of Common Stock as Converted
Text Block 
 
Share Repurchase Program Disclosure [Table Text Block]
Text Block 
 
Schedule of Treasury Stock by Class [Table Text Block] 
The following table presents share repurchases in the open market during the following fiscal years:
(in millions, except per share data)
2012
 
2011
Shares repurchased in the open market (1)
6.2

 
26.6

Weighted-average repurchase price per share
$
114.87

 
$
76.08

Total cost
$
710

 
$
2,024

(1) 
All shares repurchased in the open market have been retired and constitute authorized but unissued shares.
Schedule of Common Stock as Converted 
The number of shares of each class and the number of shares of class A common stock on an as-converted basis at September 30, 2012, are as follows:  
 
(in millions except conversion rate)
Shares
Outstanding
 
Conversion
Rate Into
Class A
Common
Stock
 
As-converted Class A Common
Stock (1)
 
 
Class A common stock
535
 
—
 
535
 
Class B common stock
245
 
0.4206
 
103
 
Class C common stock
31
 
1.0000
 
31
 
Total
 
 
 
 
668
(1) 
Figures may not sum due to rounding. As-converted class A common stock count is calculated based on whole numbers.
Share Repurchase Program Disclosure [Table Text Block] 
The following table presents as-converted class B common stock after deposits into the litigation escrow account:
 
Fiscal 2012
 
Fiscal 2011
(in millions, except per share and conversion data)
July 2012
 
December 2011
 
March
2011
 
October
2010
Deposits under the retrospective responsibility plan
$
150

 
$
1,565

 
$
400

 
$
800

Effective price per share(1)
$
125.50

 
$
101.75

 
$
73.81

 
$
72.74

Reduction in equivalent number of shares of class A common stock
1.2

 
15.4

 
5.4

 
11.0

Conversion rate of class B common stock to class A common stock after deposits
0.4206

 
0.4254

 
0.4881

 
0.5102

As-converted class B common stock after deposits
103

 
104

 
120

 
125

(1) 
Effective price per share calculated using the volume-weighted average price of the Company's class A common stock over a pricing period in accordance with the Company's amended and restated certificate of incorporation.
Earnings Per Share (Tables)
Schedule of Earnings Per Share
The following table presents basic and diluted earnings per share for fiscal 2012. 


 
Basic Earnings Per Share
 
 
Diluted Earnings Per Share
 
(in millions, except per share data)
 
Income
Allocation
(A) (1)
 
Weighted
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B) (2)
 
 
Income
Allocation
(A) (1)
 
Weighted
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B) (2)
Class A common stock
$
1,664

  
524

 
$
3.17

 
 
$
2,144

 
678

(3) 
$
3.16

Class B common stock
343

 
245

 
1.40

 
 
341

 
245

 
1.39

Class C common stock
130

  
41

 
3.17

 
 
129

 
41

 
3.16

Participating securities(4)
7

  
Not presented

 
Not presented

 
 
7

 
Not presented

 
Not presented

Net income attributable to Visa Inc.
$
2,144

  
 
 
 
 
 
 
 
 
 
 
The following table presents basic and diluted earnings per share for fiscal 2011. 
 
Basic Earnings Per Share
 
 
Diluted Earnings Per Share
 
(in millions, except per share data)
 
Income
Allocation
(A) (1)
 
Weighted
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B) (2)
 
 
Income
Allocation
(A) (1)
 
Weighted
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B) (2)
Class A common stock
$
2,638

 
509
 
$
5.18

 
 
$
3,650

 
707
(3) 
$
5.16

Class B common stock
636

 
245
 
2.59

 
 
633

 
245
 
2.58

Class C common stock
364

 
70
 
5.18

 
 
363

 
70
 
5.16

Participating securities(4)
12

  
Not presented
 
Not presented

 
 
12

  
Not presented
 
Not presented

Net income attributable to Visa Inc.
$
3,650

  
 
 
 
 
 
 
 
 
 
 
The following table presents basic and diluted earnings per share for fiscal 2010. 
 
Basic Earnings Per Share
 
 
Diluted Earnings Per Share
 
(in millions, except per share data)
 
Income
Allocation
(A) (1)
 
Weighted
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B) (2)
 
 
Income
Allocation
(A) (1)
 
Weighted
Average
Shares
Outstanding (B)
 
Earnings per
Share =
(A)/(B) (2)
Class A common stock
$
1,940

  
482
 
$
4.03

 
 
$
2,966

  
739
(3) 
$
4.01

Class B common stock
566

 
245
 
2.31

 
 
565

 
245
 
2.30

Class C common stock
451

  
112
 
4.03

 
 
449

  
112
 
4.01

Participating securities(4)
9

  
Not presented
 
Not presented

 
 
9

  
Not presented
 
Not presented

Net income attributable to Visa Inc.
$
2,966

  
 
 
 
 
 
 
 
 
 
 
(1) 
Net income attributable to Visa Inc. is allocated based on proportional ownership on an as-converted basis. The weighted average numbers of shares of as-converted class B common stock used in the income allocation were 108 million, 123 million and 141 million for fiscal 2012, 2011 and 2010, respectively.
(2) 
Earnings per share calculated based on whole numbers, not rounded numbers.
(3) 
Weighted-average dilutive shares outstanding is calculated on an as-converted basis, and includes incremental common stock equivalents, as calculated under the treasury stock method. The computation includes 3 million common stock equivalents for fiscal 2012 and 2011, and 2 million common stock equivalents for fiscal 2010, respectively, because their effect would have been dilutive, and excludes less than 1 million, 2 million and 3 million common stock equivalents for fiscal 2012, 2011 and 2010, respectively, because their effect would have been anti-dilutive.
(4) 
Participating securities are unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents, such as the Company's restricted stock awards, restricted stock units and earned performance-based shares.
Share-based Compensation (Tables)
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Method Used 
During fiscal 2012, 2011 and 2010, the fair value of each stock option was estimated on the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:
 
 
2012
 
2011
 
2010 (1)
Expected term (in years)(2)
 
6.02

 
5.16

 
3.46

Risk-free rate of return(3)
 
1.2
%
 
1.2
%
 
1.4
%
Expected volatility(4)
 
34.9
%
 
33.4
%
 
36.4
%
Expected dividend yield(5)
 
0.9
%
 
0.8
%
 
0.7
%
Fair value per option granted
 
$
29.65

 
$
27.50

 
$
29.46

(1) 
Includes the impact of 1.6 million replacement awards issued to former CyberSource employees as part of the CyberSource acquisition in July 2010. These awards have a weighted-average exercise price of $47.34 per share and vest over a period of less than three years from the replacement grant date.
(2) 
Based on a set of peer companies that management believes is generally comparable to Visa.
(3) 
Based upon the zero coupon U.S. treasury bond rate over the expected term of the awards.
(4) 
Based on the average of the Company’s implied and historical volatility. As the Company’s publicly traded stock history is relatively short, historical volatility relies in part on the historical volatility of a group of peer companies that management believes is generally comparable to Visa. The expected volatilities ranged from 31% to 35% in fiscal 2012.
(5) 
Based on the Company’s annual dividend rate on the date of grant.
Schedule of Share-based Compensation, Options Activity 
The following table summarizes the Company’s option activity for fiscal 2012:
 
Options
 
Weighted-
Average
Exercise Price
Per Share
 
Weighted-
Average
Remaining
Contractual
Term
(in years)
 
Aggregate
Intrinsic
Value (1)
(in millions)
Outstanding at October 1, 2011
8,554,389

 
$
52.81

 
 
 
 
Granted
441,191

 
93.22

 
 
 
 
Forfeited
(140,590
)
 
72.90

 
 
 
 
Exercised
(3,669,315
)
 
47.50

 
 
 
 
Outstanding at September 30, 2012
5,185,675

 
59.46

 
6.1
 
$388
Options exercisable at September 30, 2012
3,746,662

 
51.98

 
5.6
 
$308
Options exercisable and expected to be vested at September 30, 2012(2)
5,039,896

 
$
58.92

 
6.1
 
$380
(1) 
Calculated using the closing stock price on the last trading day of fiscal 2012 of $134.28, less the option exercise price, multiplied by the number of instruments.
(2) 
Applies a forfeiture rate to unvested options outstanding at September 30, 2012 to estimate the number expected to vest in the future.
Restricted Share Activity Disclosure 
The following table summarizes the Company's RSA and RSU activity for fiscal 2012:
 
Restricted Stock
 
Weighted-
Average
Grant Date
Fair Value
 
Weighted-
Average
Remaining
Contractual
Term
(in years)
 
Aggregate
Intrinsic
Value (1)
(in millions)
 
Awards
 
Units
 
RSA
 
RSU
 
RSA
 
RSU
 
RSA
 
RSU
Outstanding at October 1, 2011
1,785,975

 
467,803

 
$
75.28

 
$
76.65

 
 
 
 
 
 
 
 
Granted
974,233

 
432,763

 
96.39

 
96.97

 
 
 
 
 
 
 
 
Vested
(911,877
)
 
(224,401
)
 
71.03

 
73.24

 
 
 
 
 
 
 
 
Forfeited
(111,342
)
 
(38,520
)
 
84.44

 
84.49

 
 
 
 
 
 
 
 
Outstanding at September 30, 2012
1,736,989

 
637,645

 
$
88.77

 
$
91.17

 
1.6
 
1.4
 
$233
 
$86
(1) 
Calculated by multiplying the closing stock price on the last trading day of fiscal 2012 of $134.28 by the number of instruments.
Disclosure of Share-based Compensation Arrangements by Share-based Payment Award 
The following table summarizes the maximum number of performance-based shares which could be earned and related activity for fiscal 2012:
 
Shares
 
Weighted-
Average
Grant Date
Fair Value
 
Weighted-
Average
Remaining
Contractual
Term
(in years)
 
Aggregate
Intrinsic
Value (1)
(in millions)
Outstanding at October 1, 2011
632,786

 
$
80.69

 
 
 
 
Granted
132,227

 
97.84

 
 
 
 
Vested and earned
(213,801
)
 
70.41

 
 
 
 
Unearned
(6,977
)
 
88.06

 
 
 
 
Forfeited
(18,008
)
 
89.75

 
 
 
 
Outstanding at September 30, 2012
526,227

 
$
88.56

 
0.9
 
$71
(1) 
Calculated by multiplying the closing stock price on the last trading day of fiscal 2012 of $134.28 by the number of instruments.
F
Commitments and Contingencies (Tables)
Commitments Disclosure 
Future minimum payments on leases and marketing and sponsorship agreements per fiscal year, at September 30, 2012, are as follows:
(in millions)
2013
 
2014
 
2015
 
2016
 
2017
 
Thereafter
 
Total
Operating leases
$
95

 
$
75

 
$
48

 
$
35

 
$
28

 
$
64

 
$
345

Capital leases
6

 
—

 
—

 
—

 
—

 
—

 
6

Marketing and sponsorships
120

 
120

 
117

 
61

 
54

 
231

 
703

Total
$
221

 
$
195

 
$
165

 
$
96

 
$
82

 
$
295

 
$
1,054

Expected Reduction of Revenue for Volumn and Support Incentive Agreements 
The table below sets forth the expected future reduction of revenue for client incentive agreements in effect at September 30, 2012: 
(in millions)
2013
 
2014
 
2015
 
2016
 
2017
 
Thereafter
 
Total
Client incentives
$
2,277

 
$
1,947

 
$
1,590

 
$
1,189

 
$
675

 
$
523

 
$
8,201

Income Taxes (Tables)
Schedule of U.S. and non-U.S. components of income before income tax expense/(benefit) 
The Company’s income before taxes by fiscal year consisted of the following:
 
2012
 
2011
 
2010
 
(in millions)
U.S.
$
1,030

 
$
4,650

 
$
3,973

Non-U.S.
1,177

 
1,006

 
665

Total income before taxes and non-controlling interest
$
2,207

 
$
5,656

 
$
4,638

Comprehensive Income Tax (Expense) Benefit Components Table 
Income tax provision by fiscal year consisted of the following:
 
2012
 
2011
 
2010
 
(in millions)
Current:
 
 
 
 
 
U.S. federal
$
1,376

 
$
1,365

 
$
1,089

State and local
165

 
311

 
260

Non-U.S.
214

 
168

 
76

Total current taxes
1,755

 
1,844

 
1,425

Deferred:
 
 
 
 
 
U.S. federal
(1,276
)
 
160

 
209

State and local
(415
)
 
(2
)
 
35

Non-U.S.
1

 
8

 
5

Total deferred taxes
(1,690
)
 
166

 
249

Total income tax provision
$
65

 
$
2,010

 
$
1,674

Components of Deferred Tax Assets and Liabilities 
The tax effect of temporary differences that give rise to significant portions of deferred tax assets and liabilities at September 30, 2012 and 2011, are presented below:
 
2012
 
2011
 
(in millions)
Deferred Tax Assets
 
 
 
Accrued compensation and benefits
$
103

 
$
96

Comprehensive income
102

 
104

Investments in joint ventures
11

 
15

Accrued litigation obligation
1,654

 
128

Client incentives
227

 
184

Net operating loss carryforward
33

 
38

Tax credits
23

 
26

Federal benefit of state taxes
90

 
300

Federal benefit of foreign taxes
16

 
7

Other
92

 
76

Valuation allowance
(13
)
 
—

Deferred tax assets
2,338

 
974

Deferred Tax Liabilities
 
 
 
Property, equipment and technology, net
(288
)
 
(266
)
Intangible assets
(4,027
)
 
(4,374
)
Foreign taxes
(44
)
 
(40
)
Other
(10
)
 
(10
)
Deferred tax liabilities
(4,369
)
 
(4,690
)
Net deferred tax liabilities
$
(2,031
)
 
$
(3,716
)
Deferred Tax Assets and Liabilities 
Total net deferred tax assets and liabilities are included in the Company’s consolidated balance sheets as follows:
 
September 30,
2012
 
September 30,
2011
 
(in millions)
Current deferred tax assets
$
2,027

 
$
489

Non-current deferred tax liabilities
(4,058
)
 
(4,205
)
Net deferred tax liabilities
$
(2,031
)
 
$
(3,716
)
Reconciliation of the US Statutory Federal Tax Rate 
The income tax provision differs from the amount of income tax determined by applying the applicable U.S. federal statutory rate of 35% to pretax income, as a result of the following:
 
 
For the Years Ended September 30
 
2012
 
2011
 
2010
 
Dollars
 
Percent
 
Dollars
 
Percent
 
Dollars
 
Percent
 
(in millions)
U.S. federal income tax at statutory rate
$
772

 
35
 %
 
$
1,980

 
35
 %
 
$
1,623

 
35
 %
State income taxes, net of federal benefit
36

 
2
 %
 
203

 
4
 %
 
177

 
4
 %
Non-U.S. tax effect, net of federal benefit
(257
)
 
(12
)%
 
(150
)
 
(2
)%
 
(124
)
 
(2
)%
Reversal of tax reserves related to the deductibility of covered litigation expense
(299
)
 
(14
)%
 
—

 
—
 %
 
—

 
—
 %
Remeasurement of deferred taxes due to:
 
 
 
 
 
 
 
 
 
 
 
California state apportionment rule changes
(208
)
 
(9
)%
 
—

 
—
 %
 
—

 
—
 %
Other state apportionment changes
11

 
1
 %
 
(3
)
 
—
 %
 
15

 
—
 %
Revaluation of Visa Europe put option
—

 
—
 %
 
(43
)
 
(1
)%
 
(28
)
 
(1
)%
Other, net
10

 
—
 %
 
23

 
—
 %
 
11

 
—
 %
Income tax provision
$
65

 
3
 %
 
$
2,010

 
36
 %
 
$
1,674

 
36
 %
Unrecognized Tax Benefits Reconciliation, Table 
A reconciliation of beginning and ending unrecognized tax benefits by fiscal year is as follows: 
 
2012
 
2011
 
(in millions)
Beginning balance at October 1
$
850

 
$
545

Increases of unrecognized tax benefits related to prior years
186

 
206

Decreases of unrecognized tax benefits related to prior years
(445
)
 
(52
)
Increases of unrecognized tax benefits related to current year
89

 
158

Reductions related to lapsing statute of limitations
(1
)
 
(7
)
Ending balance at September 30
$
679

 
$
850

Legal Matters (Tables)
Schedule of Loss Contingencies by Contingency
The following table summarizes the activity related to accrued litigation for both covered and other non-covered litigation for the years ended September 30, 2012 and 2011:
 
2012
 
2011
 
(in millions)
Balance at October 1
$
425

 
$
697

Provision for unsettled legal matters
4,100

 
—

Provision for settled legal matters
—

 
7

Reclassification of settled matters (1)
—

 
12

Interest accretion on settled matters
1

 
11

Payments on settled matters
(140
)
 
(302
)
Balance at September 30
$
4,386

 
$
425

(1) 
Reclassification of amount previously recorded in accrued liabilities.
Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
years
Sep. 30, 2011
OTTI recognized related to corporate debt, mortgage backed and asset backed securities
$ 3,283 
$ 711 
Other-than-temporary impairment on investments and other assets
$ 4 
 
Expected average employee future service period for United States plans (in years)
8 
 
Acquired long-lived intangible assets useful life, minimum
1 
 
Acquired long-lived intangible assets useful life, maximum
15 
 
Furniture and Fixtures
 
 
Minimum estimated useful life
2 
 
Maximum estimated useful life
7 
 
Building Improvements
 
 
Minimum estimated useful life
3 
 
Maximum estimated useful life
40 
 
Building
 
 
Minimum estimated useful life
40 
 
Visa Europe - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
9 Months Ended 12 Months Ended
Jun. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Visa Europe [Abstract]
 
 
 
 
Maximum number of days within which the Company is required to purchase the shares of Visa Europe put option
 
285 days 
 
 
Put option, fair value
 
$ 145 1
$ 145 1
 
Probability of exercise by Visa Europe
 
40.00% 
40.00% 
 
Fair value adjustment for the Visa Europe put option
122 
0 
(122)
(79)
P/E differential at the time of exercise
 
190.00% 
190.00% 
 
License fee (per year payable quarterly except for year ended September 30, 2008)
 
$ 143 
$ 143 
$ 143 
Changes in the Escrow Account (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Oct. 29, 2012
Escrow Account [Roll Forward]
 
 
 
 
Balance at October 1
$ 2,857 
$ 1,936 
 
$ 4,082 
Deposits into litigation escrow account
1,715 
1,200 
 
 
American Express settlement payments
(140)
(280)
 
 
Interest earned, less applicable taxes
0 
1 
 
 
Balance at September 30
4,432 
2,857 
1,936 
4,082 
Settlement payable
719 
449 
 
350 
Litigation provision
4,100 
7 
(45)
 
Covered Litigation
 
 
 
 
Escrow Account [Roll Forward]
 
 
 
 
Litigation provision
$ (4,098)
 
 
 
Fair Value Measurements and Investments - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
9 Months Ended 12 Months Ended 12 Months Ended
Jun. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Sep. 30, 2010
Reserve Primary Fund
Sep. 30, 2012
Earn out related to PlaySpan acquisition
Fair Value, Measurements, Recurring
Level 3
Sep. 30, 2011
Earn out related to PlaySpan acquisition
Fair Value, Measurements, Recurring
Level 3
Sep. 30, 2011
Companhia Brasileira de Solucoes e Servicos [Member]
Mar. 2, 2011
Pay Span Inc
Accounting Purchase Consideration
Long-term available-for-sale investment securities
 
$ 3,283 
$ 711 
 
 
 
 
 
 
Fair value of earn-put provision
 
 
 
 
 
 
 
 
24 
Put option, fair value
 
145 1
145 1
 
 
12 
24 
 
 
Fair value adjustment for the Visa Europe put option
122 
0 
(122)
(79)
 
 
 
 
 
Non-marketable equity securities, recognized losses due to impairment
 
2.0 
0 
3.0 
 
 
 
 
 
Pre-tax gain related to pro-rata ownership in Reserve Primary Fund
 
36 
108 
49 
20 
 
 
 
 
Trading assets, mutual fund investments related to various employee compensation plans
 
66 
57 
 
 
 
 
 
 
Gain on other investments from the sale of equity interest in Visa Vale, pre-tax gain
 
 
 
 
 
 
 
85 
 
Non-marketable equity investments
 
$ 86 
$ 100 
 
 
 
 
 
 
Assets and Liabilities Measured at Fair Value on a Recurring Basis (Detail) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Sep. 30, 2011
Other liabilities
 
 
Visa Europe put option
$ 145 1
$ 145 1
Level 1 |
Fair Value, Measurements, Recurring
 
 
Derivative financial instruments
 
 
Fair Value, Assets
6,810 
4,632 
Level 1 |
US Treasury securities |
Fair Value, Measurements, Recurring
 
 
Investment securities
 
 
Investment securities
1,066 
350 
Level 1 |
Equity securities |
Fair Value, Measurements, Recurring
 
 
Investment securities
 
 
Investment securities
68 
57 
Level 1 |
Money market funds |
Fair Value, Measurements, Recurring
 
 
Cash equivalents and restricted cash
 
 
Money market funds and time deposits
5,676 
4,225 
Level 2 |
Fair Value, Measurements, Recurring
 
 
Derivative financial instruments
 
 
Fair Value, Assets
2,990 
1,773 
Level 2 |
U.S. government-sponsored agency debt securities |
Fair Value, Measurements, Recurring
 
 
Investment securities
 
 
Investment securities
2,821 
1,568 
Level 2 |
Corporate Debt Securities |
Fair Value, Measurements, Recurring
 
 
Investment securities
 
 
Investment securities
63 
0 
Level 2 |
Foreign exchange derivative instruments |
Fair Value, Measurements, Recurring
 
 
Derivative financial instruments
 
 
Foreign exchange derivative instruments
13 
30 
Other liabilities
 
 
Foreign exchange derivative instruments
11 
7 
Level 2 |
U.S. government-sponsored agency debt securities |
Fair Value, Measurements, Recurring
 
 
Cash equivalents and restricted cash
 
 
Money market funds and time deposits
0 
175 
Commercial Paper
 
 
Cash equivalents and restricted cash
 
 
Money market funds and time deposits
93 
 
Level 3 |
Fair Value, Measurements, Recurring
 
 
Derivative financial instruments
 
 
Fair Value, Assets
7 
7 
Level 3 |
Auction Rate Securities |
Fair Value, Measurements, Recurring
 
 
Investment securities
 
 
Investment securities
7 
7 
Level 3 |
Visa Europe put option |
Fair Value, Measurements, Recurring
 
 
Other liabilities
 
 
Visa Europe put option
145 
145 
Level 3 |
Earn out related to PlaySpan acquisition |
Fair Value, Measurements, Recurring
 
 
Other liabilities
 
 
Visa Europe put option
$ 12 
$ 24 
Contractual Maturity of Available-for-sale Debt Securities (Detail) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Amortized Cost
 
Due within one year
$ 674 
Due after 1 year through 5 years
3,272 
Due after 5 years through 10 years
0 
Due after 10 years
7 
Total
3,953 
Fair Value
 
Due within one year
674 
Due after 1 year through 5 years
3,276 
Due after 5 years through 10 years
0 
Due after 10 years
7 
Total
$ 3,957 
Amortized Cost, Unrealized Gains and Losses, and Fair Value of Available-for-sale Securities (Detail) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Sep. 30, 2011
Available-For-Sale Amortized Cost
$ 3,957 
$ 1,925 
Available-For-Sale Gross Unrealized Gains
4 
0 
Available-For-Sale Gross Unrealized Losses
(1)
0 
Available-For-Sale Fair Value
3,960 
1,925 
Less: current portion of available-for-sale investment securities
(677)
(1,214)
Long-term available-for-sale investment securities
3,283 
711 
Debt Securities |
US Treasury securities
 
 
Available-For-Sale Amortized Cost
1,065 
350 
Available-For-Sale Gross Unrealized Gains
1 
 
Available-For-Sale Fair Value
1,066 
350 
Debt Securities |
US Government-sponsored agency debt securities
 
 
Available-For-Sale Amortized Cost
2,818 
1,568 
Available-For-Sale Gross Unrealized Gains
3 
 
Available-For-Sale Fair Value
2,821 
1,568 
Debt Securities |
Corporate Debt Securities
 
 
Available-For-Sale Amortized Cost
63 
 
Available-For-Sale Fair Value
63 
   
Debt and Equity Securities |
Auction Rate Securities
 
 
Available-For-Sale Amortized Cost
11 
7 
Available-For-Sale Gross Unrealized Losses
(1)
 
Available-For-Sale Fair Value
10 
7 
Available for sale Securities Current
 
 
Less: current portion of available-for-sale investment securities
$ (677)
$ (1,214)
Investment Income, Net (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Investments and Fair Value Measurements [Abstract]
 
 
 
Interest and dividend income on cash and investments
$ 17 
$ 16 
$ 26 
Gain on other investments
17 
92 
20 
Unrealized (losses) gains, net
9 
(5)
3 
Realized gains (losses), net
(1)
1 
1 
Realized gains (losses), net
0 
4 
2 
Other-than-temporary impairment on investments and other assets
(6)
0 
(3)
Investment income
$ 36 
$ 108 
$ 49 
Acquisitions - Additional Information (Detail) (USD $)
12 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended
Jul. 21, 2011
Sep. 30, 2012
Fudamo
years
Jun. 9, 2011
Fudamo
Sep. 30, 2012
Pay Span Inc
years
Mar. 2, 2011
Pay Span Inc
Jul. 21, 2010
CyberSource Corporation Acquisition
years
Sep. 30, 2012
CyberSource Corporation Acquisition
years
Sep. 30, 2010
CyberSource Corporation Acquisition
Jul. 21, 2011
CyberSource Corporation Acquisition
Jul. 21, 2011
CyberSource Corporation Acquisition
Second Reporting Unit
Technology assets, weighted average useful lives (in years)
 
5 
 
5 
 
12 
7 
 
 
 
Purchase consideration
 
 
$ 110,000,000 
 
$ 204,000,000 
 
 
 
$ 1,952,000,000 
 
Additional goodwill
 
 
80,000,000 
 
141,000,000 
 
 
 
1,239,000,000 
800,000,000 
Stock options, granted
 
 
 
 
 
 
 
 
1,600,000 
 
Stock options, granted fair value
 
 
 
 
 
 
 
 
46,000,000 
 
Vesting period from the date of grant
 
 
 
 
 
 
3 
 
 
 
Acquisition-related costs
 
 
 
 
 
 
 
13,000,000 
 
 
Earn-out provision
$ 0 
 
 
 
 
 
 
 
 
 
Acquisitions Total Purchase Consideration for Acquisitions (Details) (USD $)
Jul. 21, 2011
Business Acquisition [Line Items]
 
Earn-out provision
$ 0 
Summary of the Purchase Price Allocation (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended
Sep. 30, 2012
Fudamo
years
Jun. 9, 2011
Fudamo
Jun. 9, 2011
Fudamo
Technology Assets [Member]
Sep. 30, 2012
Pay Span Inc
years
Mar. 2, 2011
Pay Span Inc
Sep. 30, 2012
Pay Span Inc
Technology Assets [Member]
Jul. 21, 2010
CyberSource Corporation Acquisition
years
Sep. 30, 2012
CyberSource Corporation Acquisition
years
Jul. 21, 2011
CyberSource Corporation Acquisition
Sep. 30, 2012
CyberSource Corporation Acquisition
Technology Assets [Member]
Tangible assets and liabilities
 
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
$ 259 
 
Non-current assets
 
 
 
 
 
 
 
 
150 1
122 
Current liabilities
 
 
 
 
 
 
 
 
(45)
 
Non-current liabilities
 
 
 
 
 
 
 
 
(256)
 
Tangible assets, net
 
27 2
25 
 
67 3
56 
 
 
 
 
Finite-lived intangible assets
 
5 
 
 
15 
 
 
 
605 
 
Goodwill
 
80 
 
 
141 
 
 
 
1,239 
 
Net deferred tax liabilities
 
(2)
 
 
(19)
 
 
 
 
 
Net assets acquired
 
$ 110 
 
 
$ 204 
 
 
 
$ 1,952 
 
Finite-lived intangible assets, weighted-average useful live (in years)
 
 
 
2.8 
 
 
 
 
 
 
Technology assets, weighted average useful lives (in years)
5 
 
 
5 
 
 
12 
7 
 
 
Fair Value of the Acquired Intangible Assets (Detail) (USD $)
In Millions, unless otherwise specified
0 Months Ended 12 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended 12 Months Ended
Jul. 21, 2010
CyberSource Corporation Acquisition
years
Sep. 30, 2012
CyberSource Corporation Acquisition
years
Jul. 21, 2011
CyberSource Corporation Acquisition
Jul. 21, 2010
CyberSource Corporation Acquisition
Customer relationships
years
Jul. 21, 2011
CyberSource Corporation Acquisition
Customer relationships
Jul. 21, 2010
CyberSource Corporation Acquisition
Reseller relationships
years
Jul. 21, 2011
CyberSource Corporation Acquisition
Reseller relationships
Jul. 21, 2010
CyberSource Corporation Acquisition
Tradenames
years
Jul. 21, 2011
CyberSource Corporation Acquisition
Tradenames
Sep. 30, 2012
Pay Span Inc
years
Mar. 2, 2011
Pay Span Inc
Fair Value
 
 
$ 605 
 
$ 320 
 
$ 95 
 
$ 190 
 
$ 15 
Technology assets, weighted average useful lives (in years)
12 
7 
 
10 
 
9 
 
15 
 
5 
 
Prepaid Expenses and Other Current Assets (Detail) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Sep. 30, 2011
Prepaid Expenses and Other Assets [Abstract]
 
 
Prepaid expenses and maintenance
$ 69 
$ 96 
Income tax receivable-(See Note 20-Income Taxes)
179 
112 
Derivative Instruments and Hedges, Assets
13 
30 
Other
40 
27 
Total
$ 301 
$ 265 
Other Non-Current Assets (Detail) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Sep. 30, 2011
Prepaid Expenses and Other Assets [Abstract]
 
 
Other investments - (See Note 4-Fair Value Measurements and Investments)
$ 86 
$ 100 
Pension asset--(See Note 11--Pension, Postretirement and Other Benefits)
23 
0 
Long-term prepaid expenses and other
42 
29 
Total
$ 151 
$ 129 
Property, Equipment and Technology, Net (Detail) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Sep. 30, 2011
Total property, equipment and technology
$ 3,081 
$ 2,749 
Accumulated depreciation and amortization
(1,447)
(1,208)
Property, equipment and technology, net
1,634 
1,541 
Land [Member]
 
 
Total property, equipment and technology
71 
71 
Building
 
 
Total property, equipment and technology
751 
719 
Construction in Progress [Member]
 
 
Total property, equipment and technology
837 
755 
Construction in Progress [Member]
 
 
Total property, equipment and technology
69 
89 
Technology Assets [Member]
 
 
Total property, equipment and technology
$ 1,353 
$ 1,115 
Property, Equipment and Technology, Net - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Net assets acquired included in property, equipment and technology, net
$ 1,634 
$ 1,541 
 
Technology, accumulated amortization
812 
677 
 
Depreciation and amortization
333 
288 
265 
Depreciation and amortization, amortization expense on technology
68 
63 
10 
Property, Equipment and Technology
 
 
 
Depreciation and amortization
265 
225 
265 
Technology and Software
 
 
 
Depreciation and amortization, amortization expense on technology
$ 132 
$ 102 
$ 137 
Estimated Future Amortization Expense on Technology Placed in Service (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
2012
$ 69 
2013
66 
2014
62 
2015
49 
2016 and thereafter
291 
Total
537 
Technology and Software
 
2012
148 
2013
132 
2014
120 
2015
88 
2016 and thereafter
53 
Total
$ 541 
Intangible Assets, Net - Additional Information (Detail) (USD $)
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Intangible Assets, Net [Abstract]
 
 
 
Customer relationships
$ 6,800,000,000 
 
 
Tradename
2,600,000,000 
 
 
Visa Europe franchise right
1,500,000,000 
 
 
Amortization expense related to finite-lived intangible assets
$ 68,000,000 
$ 63,000,000 
$ 10,000,000 
Estimated Future Amortization Expense on Finite-Lived Intangible Assets (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Intangible Assets, Net [Abstract]
 
2012
$ 69 
2013
66 
2014
62 
2015
49 
2016 and thereafter
291 
Total
$ 537 
Accrued Liabilities (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Accrued and Other Liabilities [Abstract]
 
 
Accrued operating expenses
$ 194 
$ 175 
Visa Europe put option-(See Note 2-Visa Europe)
145 1
145 1
Deferred revenue
59 
63 
Accrued marketing and product expenses
22 
36 
Accrued income taxes-(See Note 20-Income Taxes)
58 
63 
Other
106 
80 
Total
$ 584 
$ 562 
Maximum number of days within which the Company is required to purchase the shares of Visa Europe put option
285 days 
 
Other Long-term Liabilities (Detail) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Sep. 30, 2011
Accrued and Other Liabilities [Abstract]
 
 
Accrued income taxes-(See Note 20-Income Taxes)
$ 171 
$ 468 
Employee benefits
93 
106 
Other
107 
93 
Total
$ 371 
$ 667 
Debt - Additional Information (Detail) (USD $)
12 Months Ended
Sep. 30, 2012
Facility fee percent
0.05% 
Utilization fee percent
0.05% 
Debt Instrument, Basis Spread on Variable Rate
0.15% 
Minimum
 
Applicable margin rate percent
0.11% 
Facility fee percent
0.04% 
Utilization fee percent
0.05% 
Maximum
 
Applicable margin rate percent
0.30% 
Facility fee percent
0.10% 
Utilization fee percent
0.10% 
Commercial Paper
 
Issuance of debt under U.S. commercial paper program
$ 500,000,000 
Maturity period maximum in days
270 days 
Line of Credit
 
Credit Facilities
$ 3,000,000,000 
Pension, Postretirement and Other Benefits - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Pension, Postretirement and Other Benefits [Abstract]
 
 
 
Cash balance formula contributions, rate of eligible compensation
6.00% 
 
 
Assumed annual rate of future increases in health benefits for the other postretirement benefits plan for fiscal 2011
8.00% 
 
 
Assumed annual rate of future decreases in health benefits for the other postretirement benefits plan by 2017
5.00% 
 
 
Increasing or decreasing the healthcare cost trend by one per cent would increase decrease the postretirement accumulated plan benefit obligation by less than
$ 1 
 
 
Target allocation for plan assets, equity securities, minimum
50.00% 
 
 
Target allocation for plan assets, equity securities, maximum
80.00% 
 
 
Target allocation for plan assets, fixed income securities, minimum
25.00% 
 
 
Target allocation for plan assets, fixed income securities, maximum
35.00% 
 
 
Target allocation for plan assets, other
7.00% 
 
 
Plan asset allocation, equity securities
65.00% 
 
 
Plan asset allocation, fixed income securities
27.00% 
 
 
Plan asset allocation, other
8.00% 
 
 
Defined contribution plan, personnel costs
$ 37 
$ 34 
$ 29 
Change in Projected Benefit Obligation/Accumulated Postretirement Benefit Obligation (Detail) (USD $)
In Millions, unless otherwise specified
0 Months Ended 12 Months Ended
Oct. 19, 2012
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Recognized in Consolidated Balance Sheets:
 
 
 
 
Noncurrent asset
 
$ (23)
$ 0 
 
Pension Benefits
 
 
 
 
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
 
 
 
 
Benefit obligation-beginning of fiscal year
 
839 
743 
 
Service cost
 
38 
41 
45 
Interest cost
 
40 
38 
40 
Actuarial loss (gain)
 
132 
77 
 
Benefit payments
 
(60)
(63)
 
Settlements
 
1 
3 
 
Benefit obligation-end of fiscal year
 
990 
839 
743 
Accumulated benefit obligation
 
982 
839 
 
Change in Plan Assets:
 
 
 
 
Balance at October 1
 
783 
766 
 
Actual return on plan assets
 
166 
10 
 
Company contribution
 
84 
70 
 
Benefit payments
 
(60)
(63)
 
Balance at September 30
 
973 
783 
766 
Funded status at end of fiscal year
 
(17)
(56)
 
Recognized in Consolidated Balance Sheets:
 
 
 
 
Noncurrent asset
 
(23)
0 
 
Current liability
 
(8)
(4)
 
Noncurrent liability
 
(32)
(52)
 
Funded status at end of fiscal year
 
(17)
(56)
 
Other Postretirement Benefits
 
 
 
 
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
 
 
 
 
Benefit obligation-beginning of fiscal year
 
38 
34 
 
Service cost
0 
0 
0 
0 
Interest cost
1 
1 
1 
1 
Actuarial loss (gain)
 
(3)
7 
 
Benefit payments
 
(4)
(4)
 
Settlements
 
0 
0 
 
Benefit obligation-end of fiscal year
 
32 
38 
34 
Change in Plan Assets:
 
 
 
 
Balance at October 1
 
0 
0 
 
Actual return on plan assets
 
0 
0 
 
Company contribution
 
4 
4 
 
Benefit payments
 
(4)
(4)
 
Balance at September 30
 
0 
0 
0 
Funded status at end of fiscal year
 
(32)
(38)
 
Recognized in Consolidated Balance Sheets:
 
 
 
 
Noncurrent asset
 
0 
0 
 
Current liability
 
(4)
(4)
 
Noncurrent liability
 
(28)
(34)
 
Funded status at end of fiscal year
 
$ (32)
$ (38)
 
Amounts Recognized in Accumulated Comprehensive Income Before Tax (Detail) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Sep. 30, 2011
Pension Benefits
 
 
Net actuarial loss (gain)
$ 328 
$ 343 
Prior service credit
(33)
(42)
Total
295 
301 
Other Postretirement Benefits
 
 
Net actuarial loss (gain)
(3)
1 
Prior service credit
(14)
(17)
Total
$ (17)
$ (16)
Amounts from Accumulated Other Comprehensive Income to be Amortized into Net Periodic Benefit Cost (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Pension Benefits
 
Actuarial loss (gain)
$ 28 
Prior service credit
(9)
Total
19 
Other Postretirement Benefits
 
Actuarial loss (gain)
0 
Prior service credit
(3)
Total
$ (3)
Benefit Obligation and Fair Value of Plan Assets with Obligations in Excess of Plan Assets (Detail) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Sep. 30, 2011
Accumulated benefit obligation in excess of plan assets
 
 
Accumulated benefit obligation, end of year
$ (39)
$ (839)
Fair value of plan assets, end of year
0 
783 
Projected benefit obligation in excess of plan assets
 
 
Benefit obligation, end of year
(40)
(839)
Fair value of plan assets, end of year
$ 0 
$ 783 
Components of Net Periodic Benefit Cost (Detail) (USD $)
In Millions, unless otherwise specified
0 Months Ended 12 Months Ended
Oct. 19, 2012
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Pension Benefits
 
 
 
 
Service cost
 
$ 38 
$ 41 
$ 45 
Interest cost
 
40 
38 
40 
Expected return on assets
 
(55)
(54)
(50)
Prior service credit
 
(9)
(9)
(9)
Actuarial loss (gain)
 
33 
19 
16 
Net benefit cost
 
47 
35 
42 
Settlement loss
 
3 
2 
0 
Total net periodic benefit cost
 
50 
37 
42 
Other Postretirement Benefits
 
 
 
 
Service cost
0 
0 
0 
0 
Interest cost
1 
1 
1 
1 
Expected return on assets
0 
 
0 
0 
Prior service credit
(3)
 
(3)
(3)
Actuarial loss (gain)
0 
 
(1)
(1)
Net benefit cost
(2)
 
(3)
(3)
Settlement loss
0 
 
0 
 
Total net periodic benefit cost
$ (2)
 
$ (3)
$ (3)
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Pension benefits
 
 
Current year actuarial (gain)/loss
$ 21 
$ 124 
Amortization of actuarial gain/(loss)
(36)
(21)
Amortization of prior service credit/(cost)
9 
9 
Total recognized in other comprehensive income
(6)
112 
Total recognized in net periodic benefit cost and other comprehensive income
44 
149 
Other postretirement benefits
 
 
Current year actuarial (gain)/loss
(3)
7 
Amortization of actuarial gain/(loss)
0 
1 
Amortization of prior service credit/(cost)
3 
3 
Total recognized in other comprehensive income
0 
11 
Total recognized in net periodic benefit cost and other comprehensive income
$ (2)
$ 8 
Weighted Average Actuarial Assumptions (Detail)
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Expected long-term rate of return on plan assets
7.50% 1
7.50% 1
 
Rate of increase in compensation levels for:
 
 
 
Benefit obligation
4.50% 
4.50% 
4.50% 
Net periodic benefit cost
4.50% 
4.50% 
5.50% 
Pension Benefits
 
 
 
Discount rate for benefit obligation
3.85% 2
4.70% 2
5.25% 2
Discount rate for net periodic benefit cost
4.70% 
5.25% 
5.63% 
Other Postretirement Benefits
 
 
 
Discount rate for benefit obligation
2.21% 2
3.39% 2
3.45% 2
Discount rate for net periodic benefit cost
3.39% 
3.45% 
4.43% 
Weighted Average Actuarial Assumptions (Parenthetical) (Detail)
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Rate of increase in compensation
4.50% 
4.50% 
4.50% 
Plan's Investments at Fair Value (Detail) (Fair Value, Measurements, Recurring, USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Sep. 30, 2011
Asset-backed securities
 
 
Fair Value Measurements
 
$ 33 
Level 1
 
 
Fair Value Measurements
321 
235 
Level 1 |
Cash equivalents
 
 
Fair Value Measurements
79 
55 
Level 1 |
Equity securities
 
 
Fair Value Measurements
242 
180 
Level 2
 
 
Fair Value Measurements
627 
515 
Level 2 |
Collective investment funds
 
 
Fair Value Measurements
391 
289 
Level 2 |
Corporate Debt Securities
 
 
Fair Value Measurements
115 
122 
Level 2 |
Debt securities of U.S. treasury and federal agencies
 
 
Fair Value Measurements
121 
104 
Level 3
 
 
Fair Value Measurements
25 
33 
Level 3 |
Asset-backed securities
 
 
Fair Value Measurements
25 
33 
Estimate of Fair Value, Fair Value Disclosure [Member] |
Cash equivalents
 
 
Fair Value Measurements
79 
55 
Estimate of Fair Value, Fair Value Disclosure [Member] |
Collective investment funds
 
 
Fair Value Measurements
391 
289 
Estimate of Fair Value, Fair Value Disclosure [Member] |
Corporate Debt Securities
 
 
Fair Value Measurements
115 
122 
Estimate of Fair Value, Fair Value Disclosure [Member] |
Debt securities of U.S. treasury and federal agencies
 
 
Fair Value Measurements
121 
104 
Estimate of Fair Value, Fair Value Disclosure [Member] |
Asset-backed securities
 
 
Fair Value Measurements
25 
 
Estimate of Fair Value, Fair Value Disclosure [Member] |
Equity securities
 
 
Fair Value Measurements
242 
180 
Estimate of Fair Value, Fair Value Disclosure [Member] |
Estimate of Fair Value, Fair Value Disclosure [Member]
 
 
Fair Value Measurements
$ 973 
$ 783 
Cash Flows - Actual Employer Contributions (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Pension Benefits
 
 
Actual employer contributions
$ 84 
$ 70 
Expected employer contributions
 
 
Expected employer contributions
48 
 
Expected benefit payments
 
 
Expected benefit payments 2013
116 
 
Expected benefit payments 2014
117 
 
Expected benefit payments 2015
107 
 
Expected benefit payments 2016
108 
 
Expected benefit payments 2017
100 
 
Expected benefit payments 2018-2022
419 
 
Other Postretirement Benefits
 
 
Actual employer contributions
4 
4 
Expected employer contributions
 
 
Expected employer contributions
4 
 
Expected benefit payments
 
 
Expected benefit payments 2013
4 
 
Expected benefit payments 2014
4 
 
Expected benefit payments 2015
4 
 
Expected benefit payments 2016
4 
 
Expected benefit payments 2017
4 
 
Expected benefit payments 2018-2022
$ 13 
 
Settlement Guarantee Management - Additional Information (Detail) (USD $)
Sep. 30, 2012
Sep. 30, 2011
Settlement Guarantee Management [Abstract]
 
 
Estimated maximum settlement exposure
$ 49,300,000,000 
$ 47,500,000,000 
Covered settlement exposure
3,500,000,000 
3,200,000,000 
Estimated probability-weighted value of the guarantee
$ 1,000,000 
 
Collateral (Detail) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Sep. 30, 2011
Settlement Guarantee Management [Abstract]
 
 
Cash equivalents
$ 823 
$ 931 
Pledged securities at market value
307 
296 
Letters of credit
1,084 
902 
Guarantees
2,022 
1,845 
Total
$ 4,236 
$ 3,974 
Derivative Financial Instruments - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Derivative [Line Items]
 
 
 
Cash flow hedges in an asset position
$ 12 
 
 
Cash flow hedges in a liability position
11 
 
 
Reduction in earnings from excluded forward points and ineffectiveness
16 
20 
17 
Expected amount of accumulated other comprehensive income (loss) expected to be reclassified
19 
 
 
Maximum
 
 
 
Derivative [Line Items]
 
 
 
Amount of gain or loss recognized related to ineffectiveness
1 
1 
1 
Cash Flow Hedging
 
 
 
Derivative [Line Items]
 
 
 
The aggregate notional amount of the Company's foreign currency forward contracts outstanding
690 
651 
 
Not Designated as Hedging
 
 
 
Derivative [Line Items]
 
 
 
The aggregate notional amount of the Company's foreign currency forward contracts outstanding
 
49 
 
Not Designated as Hedging |
Maximum
 
 
 
Derivative [Line Items]
 
 
 
Fair value of derivative
1 
 
 
Prepaid Expense and Other Assets Current
 
 
 
Derivative [Line Items]
 
 
 
Collateral posted with counterparties
3 
 
 
Prepaid Expense and Other Assets Current |
Not Designated as Hedging
 
 
 
Derivative [Line Items]
 
 
 
Gain recognized on derivative
1 
 
 
Accrued Liabilities
 
 
 
Derivative [Line Items]
 
 
 
Collateral received with counterparties
$ 4 
 
 
Enterprise-wide Disclosures and Concentration of Business - Additional Information (Detail)
12 Months Ended
Sep. 30, 2010
JP Morgan Chase
Sep. 30, 2012
Geographic Concentration Risk
Sales Revenue, Services, Net
Sep. 30, 2011
Geographic Concentration Risk
Sales Revenue, Services, Net
Sep. 30, 2010
Geographic Concentration Risk
Sales Revenue, Services, Net
Concentration Risk, Percentage
 
55.00% 
56.00% 
58.00% 
Revenues from the largest customers out of total operating revenues
10.00% 
 
 
 
Long-Lived Net Property, Equipment and Technology Assets Classified by Major Geographic Area (Detail) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Sep. 30, 2011
Property, equipment and technology, net
$ 1,634 
$ 1,541 
United States
 
 
Property, equipment and technology, net
1,539 
1,487 
Countries Outside of United States
 
 
Property, equipment and technology, net
$ 95 
$ 54 
Stockholders' Equity - Additional Information (Detail) (USD $)
Share data in Millions, except Per Share data, unless otherwise specified
1 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 0 Months Ended
Jul. 31, 2012
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Sep. 30, 2012
Class A common stock
Sep. 30, 2012
Class C common stock
Sep. 30, 2012
Class B common stock
Sep. 30, 2012
Accelerated Share Repurchase Program Aggregate
Class C common stock
Jul. 31, 2012
Deposit into Litigation Escrow
Dec. 31, 2011
Deposit into Litigation Escrow
Mar. 31, 2011
Deposit into Litigation Escrow
Oct. 31, 2010
Deposit into Litigation Escrow
Jul. 31, 2012
Deposit into Litigation Escrow
Class B common stock
Dec. 31, 2011
Deposit into Litigation Escrow
Class B common stock
Mar. 31, 2011
Deposit into Litigation Escrow
Class B common stock
Oct. 31, 2010
Deposit into Litigation Escrow
Class B common stock
Sep. 30, 2012
Open Market
Sep. 30, 2011
Open Market
Sep. 30, 2012
Open Market
Class A common stock
Oct. 19, 2012
Repurchase of Equity
Oct. 24, 2012
Dividend Declared
Repurchase of class A common stock (in shares)
 
22.8 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6.2 1
26.6 1
 
 
 
Funding of litigation escrow account
 
$ 1,715,000,000 
$ 1,200,000,000 
$ 500,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, conversion rate
 
 
 
 
0 
1 
0.4206 
 
 
 
 
 
0.4206 
0.4254 
0.4881 
0.5102 
 
 
 
 
 
Shares of class C common stock released from transfer restrictions, converted to class A common stock
 
 
 
 
 
 
 
121 
 
 
 
 
 
 
 
 
 
 
 
 
 
Share repurchase plan, authorized amount
1,000,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,500,000,000 
 
Stock Repurchase Program, Remaining Authorized Repurchase Amount
 
865,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends, per share amount declared
 
$ 0.22 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 0.33 
Dividends, paid
 
595,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock Repurchased and Retired During Period, Value
 
710,000,000 
2,024,000,000 
1,000,000,000 
2,400,000,000 
 
 
 
 
 
 
 
 
 
 
 
1,700,000,000 
2,024,000,000 
710,000,000 
 
 
Deposits into litigation escrow account
 
$ 1,715,000,000 
$ 1,200,000,000 
 
 
 
 
 
$ 150,000,000 
$ 1,565,000,000 
$ 400,000,000 
$ 800,000,000 
 
 
 
 
 
 
 
 
 
Number of Shares of Class A Common Shares Outstanding on an As-Converted Basis (Detail)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Class A Common Stock As Converted
668 1
 
Class A common stock
 
 
Shares Outstanding at September 30, 2010
535 
520 
Conversion rate after funding of class B common stock to class A common stock
0 
 
Class A Common Stock As Converted
535 1
 
Class B common stock
 
 
Shares Outstanding at September 30, 2010
245 
245 
Conversion rate after funding of class B common stock to class A common stock
0.4206 
 
Class A Common Stock As Converted
103 1
 
Class C common stock
 
 
Shares Outstanding at September 30, 2010
31 
47 
Conversion rate after funding of class B common stock to class A common stock
1 
 
Class A Common Stock As Converted
31 1
 
Stockholders' Equity Share Repurchases in the Open Market (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Shares repurchased in the open market
22.8 
 
 
Total cost
$ 710 
$ 2,024 
$ 1,000 
Open Market
 
 
 
Shares repurchased in the open market
6.2 1
26.6 1
 
Weighted-average repurchase price per share
$ 0 
$ 76,080,000.00 
 
Total cost
$ 1,700 
$ 2,024 
 
Stockholders' Equity Effect of Escrow Funding on the Company Repurchaseing its Common Stock (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended 12 Months Ended 1 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Class A common stock
Sep. 30, 2012
Class B common stock
Jul. 31, 2012
Deposit into Litigation Escrow
Dec. 31, 2011
Deposit into Litigation Escrow
Mar. 31, 2011
Deposit into Litigation Escrow
Oct. 31, 2010
Deposit into Litigation Escrow
Jul. 31, 2012
Deposit into Litigation Escrow
Class A common stock
Dec. 31, 2011
Deposit into Litigation Escrow
Class A common stock
Mar. 31, 2011
Deposit into Litigation Escrow
Class A common stock
Oct. 31, 2010
Deposit into Litigation Escrow
Class A common stock
Jul. 31, 2012
Deposit into Litigation Escrow
Class B common stock
Dec. 31, 2011
Deposit into Litigation Escrow
Class B common stock
Mar. 31, 2011
Deposit into Litigation Escrow
Class B common stock
Oct. 31, 2010
Deposit into Litigation Escrow
Class B common stock
Sep. 30, 2012
Open Market
Sep. 30, 2011
Open Market
Deposits under the retrospective responsibility plan
$ 1,715 
$ 1,200 
 
 
$ 150 
$ 1,565 
$ 400 
$ 800 
 
 
 
 
 
 
 
 
 
 
Weighted-average repurchase price per share
 
 
 
 
$ 125.50 1
$ 101.75 1
$ 73.81 1
$ 72.74 1
 
 
 
 
 
 
 
 
$ 0 
$ 76,080,000.00 
Equivalent shares of class A common stock repurchased
 
 
 
 
 
 
 
 
1.2 
15.4 
5.4 
11.0 
 
 
 
 
 
 
Conversion rate after funding of class B common stock to class A common stock
 
 
0 
0.4206 
 
 
 
 
 
 
 
 
0.4206 
0.4254 
0.4881 
0.5102 
 
 
As-converted class B common stock outstanding aftetr deposits
668 2
 
535 2
103 2
103 
104 
120 
125 
 
 
 
 
 
 
 
 
 
 
Basic and Diluted Earnings Per Share (Detail) (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Income allocation - Basic
$ 2,144 1
$ 3,650 1
$ 2,966 1
Class A common stock
 
 
 
Income allocation - Basic
1,664 1
2,638 1
1,940 1
Weighted Average Shares Outstanding - Basic
524 
509 
482 
Earnings per Share - Basic
$ 3.17 
$ 5.18 2
$ 4.03 2
Income allocation - Diluted
2,144 
3,650 1
2,966 1
Weighted Average Shares Outstanding - Diluted
678 3
707 3
739 3
Earnings per Share - Diluted
$ 3.16 
$ 5.16 2
$ 4.01 2
Class B common stock
 
 
 
Income allocation - Basic
343 1
636 1
566 1
Weighted Average Shares Outstanding - Basic
245 
245 
245 
Earnings per Share - Basic
$ 1.40 
$ 2.59 2
$ 2.31 2
Income allocation - Diluted
341 1
633 1
565 1
Weighted Average Shares Outstanding - Diluted
245 
245 
245 
Earnings per Share - Diluted
$ 1.39 
$ 2.58 2
$ 2.30 2
Class C common stock
 
 
 
Income allocation - Basic
130 1
364 1
451 1
Weighted Average Shares Outstanding - Basic
41 
70 
112 
Earnings per Share - Basic
$ 3.17 
$ 5.18 2
$ 4.03 2
Income allocation - Diluted
129 1
363 1
449 1
Weighted Average Shares Outstanding - Diluted
41 
70 
112 
Earnings per Share - Diluted
$ 3.16 
$ 5.16 2
$ 4.01 2
Participating Securities
 
 
 
Income allocation - Basic
7 1 4
12 1 4
9 1 4
Income allocation - Diluted
$ 7 1 4
$ 12 1 4
$ 9 1 4
Basic and Diluted Earnings Per Share (Parenthetical) (Detail)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Dilutive shares of outstanding stock awards included in computation of weighted-average dilutive shares outstanding
3 
 
2 
Stock options excluded from computation of average dilutive shares outstanding
 
2 
3 
Maximum
 
 
 
Stock options excluded from computation of average dilutive shares outstanding
1 
 
 
Class B common stock
 
 
 
Weighted average numbers of shares of class B common stock outstanding on an as-converted basis used in the allocation of net income
108 
123 
141 
Share-based Compensation - Additional Information (Detail) (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Sep. 30, 2012
years
Sep. 30, 2011
Sep. 30, 2010
Jul. 21, 2011
Options expiration period from the date of grant
10 years 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost
$ 147 
$ 154 
$ 135 
 
Total intrinsic value from options exercised
247 
77 
42 
 
Tax benefit realized from options exercised
86 
28 
15 
 
Total fair value of RSAs and RSUs vested
81 
55 
32 
 
Stock options, granted
441,191 
 
 
 
Weighted average exercise price per share, options
$ 93.22 
 
 
 
Per share acquisition price
 
 
 
$ 26.00 
Unrecognized compensation cost
17 
 
 
 
Total unrecognized compensation cost related to non-vested options expected to be recognized over a weighted average period (in years)
0.9 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term
6.1 
 
 
 
Employee Stock Option
 
 
 
 
Vesting period from the date of grant
three years 
 
 
 
Restricted Stock Awards
 
 
 
 
Unrecognized compensation cost
89 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value
$ 96.39 
$ 79.80 
$ 79.58 
 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term
1.6 
 
 
 
Restricted Stock Units
 
 
 
 
Unrecognized compensation cost
30 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value
$ 96.97 
$ 79.97 
$ 79.59 
 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term
1.4 
 
 
 
Performance Based Shares
 
 
 
 
Unrecognized compensation cost
$ 8 
 
 
 
Weighted average grant date fair value per share
$ 97.84 
$ 85.05 
$ 88.06 
 
CyberSource Corporation Acquisition
 
 
 
 
Stock options, granted
1,600,000 
 
 
 
Weighted average exercise price per share, options
$ 47.34 
 
 
 
Vesting period from the date of grant
3 
 
 
 
Equity Incentive Compensation Plan, 2007 [Member]
 
 
 
 
Maximum number of Class A Common Stock authorized for issuance under the 2007 Equity Incentive Compensation Plan ("the "EIP")
59,000,000 
 
 
 
Assumptions Used to Estimate the Fair Value of Each Stock Option on the Date of Grant Using a Black-Scholes Option Pricing Model (Parenthetical) (Detail) (USD $)
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Replacements awards, issued
441,191 
 
 
Replacement awards, weighted average exercise price per share, options
$ 93.22 
 
 
Expected volatility
34.90% 1
33.40% 1
36.40% 1 2
Minimum
 
 
 
Expected volatility
31.00% 
 
 
Maximum
 
 
 
Expected volatility
35.00% 
 
 
CyberSource Corporation Acquisition
 
 
 
Replacements awards, issued
1,600,000 
 
 
Replacement awards, weighted average exercise price per share, options
$ 47.34 
 
 
Summary of Option Activity (Detail) (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Sep. 30, 2012
years
Options
 
Beginning balance
8,554,389 
Granted
441,191 
Forfeited/expired
(140,590)
Exercised
(3,669,315)
Ending balance
5,185,675 
Options exercisable at September 30, 2012
3,746,662 
Options exercisable and expected to be vested at September 30, 2012
5,039,896 
Weighted average price per share
 
Beginning balance
$ 52.81 
Granted
$ 93.22 
Forfeited/expired
$ 72.90 
Exercised
$ 47.50 
Ending balance
$ 59.46 
Options exercisable at September 30, 2010
$ 51.98 
Options exercisable and expected to be vested at September 30, 2010
$ 58.92 
Weighted-Average Remaining Contractual Term
 
Outstanding at September 30, 2011
6.1 
Options exercisable at September 30, 2010
5.6 
Options exercisable and expected to be vested at September 30, 2010
6.1 
Aggregate Intrinsic Value
 
Outstanding at September 30, 2010
$ 388 
Options exercisable at September 30, 2010
308 
Options exercisable and expected to be vested at September 30, 2010
$ 380 
Summary of Option Activity (Parenthetical) (Detail)
Sep. 30, 2012
Stock price used to calculate aggregate intrinsic value
$ 134.28 
Summary of RSA and RSU Activity (Detail) (USD $)
12 Months Ended
Sep. 30, 2012
years
Sep. 30, 2011
Sep. 30, 2010
Weighted-Average Remaining Contactual Term
 
 
 
Outstanding at September 30, 2011
6.1 
 
 
Restricted Stock Awards
 
 
 
Restricted stock
 
 
 
Beginning balance
1,785,975 
 
 
Granted
974,233 
 
 
Vested
(911,877)
 
 
Forfeited/expired
(111,342)
 
 
Ending balance
1,736,989 
1,785,975 
 
Weighted-Average Grant Date Fair Value
 
 
 
Beginning balance
$ 75.28 
 
 
Granted
$ 96.39 
$ 79.80 
$ 79.58 
Vested
$ 71.03 
 
 
Forfeited/expired
$ 84.44 
 
 
Ending balance
$ 88.77 
$ 75.28 
 
Weighted-Average Remaining Contactual Term
 
 
 
Outstanding at September 30, 2011
1.6 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Intrinsic Value
$ 233,000,000 
 
 
Restricted Stock Units
 
 
 
Restricted stock
 
 
 
Beginning balance
467,803 
 
 
Granted
432,763 
 
 
Vested
(224,401)
 
 
Forfeited/expired
(38,520)
 
 
Ending balance
637,645 
467,803 
 
Weighted-Average Grant Date Fair Value
 
 
 
Beginning balance
$ 76.65 
 
 
Granted
$ 96.97 
$ 79.97 
$ 79.59 
Vested
$ 73.24 
 
 
Forfeited/expired
$ 84.49 
 
 
Ending balance
$ 91.17 
$ 76.65 
 
Weighted-Average Remaining Contactual Term
 
 
 
Outstanding at September 30, 2011
1.4 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Intrinsic Value
$ 86,000,000 
 
 
Summary of RSA and RSU Activity (Parenthetical) (Detail)
Sep. 30, 2012
Stock price used to calculate aggregate intrinsic value
$ 134.28 
Summary of Performance-based Shares Activity (Detail) (USD $)
12 Months Ended
Sep. 30, 2012
years
Weighted- Average Remaining Contractual Term
 
Outstanding at September 30, 2011
6.1 
Performance Awards
 
Shares
 
Beginning balance
(632,786)
Granted
132,227 
Vested
(213,801)
Unearned
6,977 
Forfeited/expired
(18,008)
Ending balance
(526,227)
Weighted- Average Grant Date Fair Value
 
Beginning balance
$ 80.69 
Granted
$ 97.84 
Vested
$ 70.41 
Unearned
$ 88.06 
Forfeited/expired
$ 89.75 
Ending balance
$ 88.56 
Weighted- Average Remaining Contractual Term
 
Outstanding at September 30, 2011
0.9 
Aggregate Intrinsic Value
 
Outstanding at September 30, 2011
$ 71,000,000 1
Summary of Performance-based Shares Activity (Parenthetical) (Detail)
Sep. 30, 2012
Stock price used to calculate aggregate intrinsic value
$ 134.28 
Commitments and Contingencies - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Rent expense incurred
$ 89 
$ 76 
$ 59 
Future Minimum Payments on Leases and Marketing and Sponsorship Agreements (Detail) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Operating leases
$ 345 
Capital leases
6 
Marketing and sponsorships
703 
Total
1,054 
2013
 
Operating leases
95 
Capital leases
6 
Marketing and sponsorships
120 
Total
221 
2014
 
Operating leases
75 
Capital leases
0 
Marketing and sponsorships
120 
Total
195 
2015
 
Operating leases
48 
Capital leases
0 
Marketing and sponsorships
117 
Total
165 
2016
 
Operating leases
35 
Capital leases
0 
Marketing and sponsorships
61 
Total
96 
2017
 
Operating leases
28 
Capital leases
0 
Marketing and sponsorships
54 
Total
82 
Thereafter
 
Operating leases
64 
Capital leases
0 
Marketing and sponsorships
231 
Total
$ 295 
Expected Reduction of Revenue for Volume and Support Incentive Agreements (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
2012
$ 2,277 
2013
1,947 
2014
1,590 
2015
1,189 
2016
675 
Thereafter
523 
Total
$ 8,201 
Related Parties - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Income from or fees received by related parties
$ 1 
$ 1 
$ 2 
Director
 
 
 
Total operating revenues from related parties
 
172 
597 
Investee
 
 
 
Total operating revenues from related parties
$ 19 
$ 28 
$ 27 
Income Taxes - Additional Information (Detail) (USD $)
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
US income before taxes
$ 1,030,000,000 
$ 4,650,000,000 
$ 3,973,000,000 
U.S. federal statutory rate
35.00% 
35.00% 
35.00% 
Provision for legal matters
4,100,000,000 
7,000,000 
(45,000,000)
Income taxes receivable included in prepaid and other current assets
179,000,000 
112,000,000 
 
Income taxes payable included in accrued taxes as part of accrued liabilities
58,000,000 
63,000,000 
 
Accrued income taxes included in other long-term liabilities
171,000,000 
468,000,000 
 
Cumulative undistributed earnings of the Company's international subsidiaries intended to be reinvested indefinitely outside the U.S
2,600,000,000 
 
 
Decreased Singapore tax as a result of the tax incentive agreement
(130,000,000)
(111,000,000)
(93,000,000)
Benefit of the tax incentive agreement on diluted net income per share
$ 0.19 
$ 0.16 
$ 0.13 
Total unrecognized tax benefits exclusive of interest and penalties
679,000,000 
850,000,000 
545,000,000 
Unrecognized tax benefits, if recognized, would reduce the effective tax rate in a future period
537,000,000 
696,000,000 
 
Interest expense included in interest expense and administrative and other
45,000,000 
7,000,000 
37,000,000 
Reversal of penalties upon the effective settlement of uncertainties surrounding the timing of certain deductions
1,000,000 
2,000,000 
 
Penalties included in interest expense and administrative and other
 
 
5,000,000 
Accrued interest related to uncertain tax positions in other long term liabilities
20,000,000 
65,000,000 
 
Accrued penalties related to uncertain tax positions in other long term liabilities
7,000,000 
8,000,000 
 
Unrecognized Tax Benefits, Period Increase (Decrease)
425,000,000 
 
 
Non United States Customers
 
 
 
US income before taxes
1,600,000,000 
1,300,000,000 
1,100,000,000 
Federal
 
 
 
Net operating loss carryforwards
20,000,000 
 
 
Research and development tax credit carryforwards
4,000,000 
 
 
Alternative minimum tax credits
1,000,000 
 
 
State and Local Jurisdiction
 
 
 
Net operating loss carryforwards
116,000,000 
 
 
Research and development tax credit carryforwards
19,000,000 
 
 
Foreign Country
 
 
 
Net operating loss carryforwards
$ 70,000,000 
 
 
Income Before Taxes by Fiscal Year (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Income Taxes [Abstract]
 
 
 
U.S.
$ 1,030 
$ 4,650 
$ 3,973 
Non-U.S.
1,177 
1,006 
665 
Income before income taxes
$ 2,207 
$ 5,656 
$ 4,638 
Income Tax Expense by Fiscal Year (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Current:
 
 
 
U.S. federal
$ 1,376 
$ 1,365 
$ 1,089 
State and local
165 
311 
260 
Non-U.S.
214 
168 
76 
Total current taxes
1,755 
1,844 
1,425 
Deferred:
 
 
 
U.S. federal
(1,276)
160 
209 
State and local
(415)
(2)
35 
Non-U.S.
1 
8 
5 
Total deferred taxes
(1,690)
166 
249 
Income tax provision
$ 65 
$ 2,010 
$ 1,674 
Tax Effect of Temporary Differences that Give Rise to Significant Portions of Deferred Tax Assets and Liabilities (Detail) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Sep. 30, 2011
Deferred Tax Assets
 
 
Accrued compensation and benefits
$ 103 
$ 96 
Comprehensive income
102 
104 
Investments in joint ventures
11 
15 
Accrued litigation obligation
1,654 
128 
Volume and support incentives
227 
184 
Net operating loss carryforward
33 
38 
Tax credits
23 
26 
Federal benefit of state taxes
90 
300 
Federal benefit of foreign taxes
16 
7 
Other
92 
76 
Deferred Tax Assets, Valuation Allowance
13 
0 
Deferred tax assets
2,338 
974 
Deferred Tax Liabilities
 
 
Property, equipment and technology, net
(288)
(266)
Intangible assets
(4,027)
(4,374)
Foreign taxes
(44)
(40)
Other
(10)
(10)
Deferred tax liabilities
(4,369)
(4,690)
Net deferred tax (liabilities) assets
$ (2,031)
$ (3,716)
Net Deferred Tax Assets and Liabilities Included in the Consolidated Balance Sheets (Detail) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2012
Sep. 30, 2011
Deferred Tax Assets, Valuation Allowance
$ (13)
$ 0 
Current deferred tax assets
2,027 
489 
Non current deferred tax liabilities
(4,058)
(4,205)
Net deferred tax (liabilities) assets
(2,031)
(3,716)
Federal
 
 
Net operating loss carryforwards
20 
 
Research and development tax credit carryforwards
4 
 
Foreign Country
 
 
Net operating loss carryforwards
$ 70 
 
Information that Causes the Income Tax Expense to Differ from the Amount of Income Tax Determined by Applying the Applicable U.S. Federal Statutory Rate of 35% to Pretax Income (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
U.S. federal income tax at statutory rate
$ 772 
$ 1,980 
$ 1,623 
State income taxes, net of federal benefit
36 
203 
177 
Non-U.S. tax effect, net of federal benefit
(257)
(150)
(124)
Reversal of tax reserves related to the deductibility of covered litigation expense
(299)
 
 
Remeasurement of deferred taxes due to California state apportionment rule changes, amount
(208)
 
 
Remeasurement of deferred taxes due to other state apportionment changes, amount
11 
(3)
15 
Revaluation of Visa Europe put option
0 
43 
28 
Other, net
10 
23 
11 
Income tax provision
$ 65 
$ 2,010 
$ 1,674 
U.S. federal income tax at statutory rate
35.00% 
35.00% 
35.00% 
State income taxes, net of federal benefit
2.00% 
4.00% 
4.00% 
Non-U.S. tax effect, net of federal benefit
(12.00%)
(2.00%)
(2.00%)
Reversal of tax reserves related to the deductibility of covered litigation expense
(14.00%)
 
 
Remeasurement of deferred taxes due to California state apportionment rule changes, percent
(9.00%)
 
 
Remeasurement of deferred taxes due to other state apportionment changes, percent
1.00% 
 
 
Revaluation of Visa Europe put option
0.00% 
(1.00%)
(1.00%)
Other, net
0.00% 
0.00% 
0.00% 
Income tax expense
3.00% 
36.00% 
36.00% 
Reconciliation of Beginning and Ending Unrecognized Tax Benefits by Fiscal Year (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
 
 
Beginning Balance
$ 850 
$ 545 
Increases of unrecognized tax benefits related to prior years
186 
206 
Decreases of unrecognized tax benefits related to prior years
(445)
(52)
Increases of unrecognized tax benefits related to current year
89 
158 
Reductions to unrecognized tax benefits related to lapsing statute of limitations
(1)
(7)
Ending Balance
$ 679 
$ 850 
Legal Matters - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
0 Months Ended 12 Months Ended 12 Months Ended 59 Months Ended 48 Months Ended 105 Months Ended 59 Months Ended 105 Months Ended 48 Months Ended 59 Months Ended 12 Months Ended
Oct. 19, 2012
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Sep. 30, 2007
Oct. 29, 2012
Sep. 30, 2012
Covered Litigation
Sep. 30, 2012
Unsettled
Sep. 30, 2011
Unsettled
Sep. 30, 2012
American Express
Sep. 30, 2012
Discover
Sep. 30, 2012
Interchage Litigation
Sep. 30, 2012
Antitrust Litigation
Aug. 31, 2009
Antitrust Litigation
Sep. 30, 2012
Additional Quarterly Settlement Amount
American Express
Sep. 30, 2012
Subsequent payment
American Express
Sep. 30, 2012
Initial Payment
American Express
Sep. 30, 2012
Annual Payment
Antitrust Litigation
Sep. 30, 2012
Payment from Litigation Escrow Account
Discover
Sep. 30, 2012
Five banks [Member]
American Express
Sep. 30, 2012
Payment from Litigation Escrow Account
Initial Payment
American Express
Sep. 30, 2012
Master Card Inc
Interchage Litigation
Sep. 30, 2012
Visa
Interchage Litigation
Oct. 29, 2012
Payment
Covered Litigation
Amount paid into a settlement fund by Visa U.S.A. and Visa International
 
$ (140)
$ (280)
 
 
 
 
 
 
$ 2,070 
$ 80 
 
$ 2,000 
 
$ 70 
$ 1,120 
 
$ 200 
$ 1,740 
 
$ 945 
 
 
 
Litigation provision
 
4,100 
7 
(45)
 
 
(4,098)
4,100 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reserve for covered litigation
 
4,400 
285 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss Contingency Accrual, at Carrying Value
 
4,386 
425 
697 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax gain related to prepayment obligations under Retailers' litigation
 
 
41 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional payment, which was refunded by Morgan Stanley, under a separate agreement related to the settlement
 
 
 
 
 
 
 
 
 
 
65 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discounted rate applied on amount of settlement agreement
 
 
 
 
4.72% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restricted Cash and Cash Equivalents
 
4,432 
2,857 
1,936 
 
4,082 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Litigation Settlement, Gross
 
 
 
 
 
 
 
 
 
 
1,800 
 
 
 
 
 
 
 
 
 
 
 
 
 
American Express total settlement payments
 
 
 
 
 
 
 
 
 
2,250 
 
 
 
 
 
 
1,130 
 
 
185 
 
 
 
 
settlement payment period
 
 
 
 
 
 
 
 
 
16 
 
 
10 
 
 
 
 
 
 
 
 
 
 
 
Litigation Settlement, Expense
 
 
 
 
1,900 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of MDL Settlement Portion
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
33.00% 
67.00% 
 
Settlement payable
 
719 
449 
 
 
350 
 
 
 
 
 
4,033 
 
 
 
 
 
 
 
 
 
 
 
(350)
Distribution to Class Merchants, Rate Amount
0.10% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
distribution to class merchants, period per terms
60 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consecutive Months of Distribution to Class Merchants
8 months 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Prepaid Settlement, Undiscounted
 
 
 
 
 
 
 
 
 
 
 
 
 
800 
 
 
 
 
 
 
 
 
 
 
Prepaid Settlement, Discounted
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 682 
 
 
 
 
 
 
 
 
 
 
Accrued Litigation for Both Covered and Other Non-Covered Litigation (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Oct. 29, 2012
Settlement payable
$ 719 
$ 449 
 
$ 350 
Beginning balance
425 
697 
 
 
Provision for legal matters
4,100 
7 
(45)
 
Reclassification of settled matters
0 
12 
 
 
Interest accretion on settled matters
1 
11 
 
 
Payments on settled matters
(140)
(302)
 
 
Ending balance
4,386 
425 
697 
 
Settled [Member]
 
 
 
 
Provision for legal matters
0 1
7 1
 
 
Unsettled
 
 
 
 
Provision for legal matters
$ 4,100 
    
 
 
Subsequent Events - Additional Information (Detail) (USD $)
1 Months Ended 0 Months Ended
Jul. 31, 2012
Oct. 29, 2012
Sep. 30, 2012
Sep. 30, 2011
Oct. 24, 2012
Dividend Declared
Oct. 19, 2012
Repurchase of Equity
Oct. 29, 2012
Payment
Covered Litigation
Settlement payable
 
$ (350,000,000)
$ (719,000,000)
$ (449,000,000)
 
 
$ 350,000,000 
Dividends, per share amount declared
 
 
$ 0.22 
 
$ 0.33 
 
 
Share repurchase plan, authorized amount
$ 1,000,000,000 
 
 
 
 
$ 1,500,000,000